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7April2016

PureTechHealthplc

PureTechHealthannouncesannualresultsforyearended31December2015PureTech Health plc (“PureTech”, LSE: PRTC), a cross-disciplinary healthcare company tacklingfundamentalhealthcareneeds,todayannouncesitsannualresultsfortheyearended31December2015.PeriodHighlights

Financial&BusinessHighlightsPureTechraisedsignificantexternalvalidatingcapitalandestablishedagreementsandpartnershipswithanumberofindustryleadersandinfluencers:

• PureTechsuccessfullyraised$248M,includinggrossproceedsof$196Minitsinitialpublicoffering(IPO)ontheMainMarketoftheLondonStockExchange

• PureTech’sVedantaBiosciencesenteredintoanupto$339MlicensingagreementwithJanssen,asubsidiaryofJohnson&Johnson,foroneofitsproductcandidates

• $69.8M of cash raised by PureTech’s growth stage businesses over 2015, including $50.3M fromoutsideinvestors

• Gelesisraised$49.5Minfinancing,includingfromoutsidefinancialinvestors• TalMedicalraised$14.0Minfinancing,includingfromoutsidefinancialinvestors• KarunaPharmaceuticalsreceivedaTranslationFundAwardofupto$3.8MfromtheWellcomeTrust• AkiliestablishedacollaborationwithleadingpatientadvocacygroupAutismSpeaks,buildingonthe

company’srelationshipswithShirePharmaceuticalsandPfizer• TheSyncProjectformedpartnershipswithinternationally-renownedorganisationsBerkleeCollege

ofMusicandHINTSAPerformance• Asof 31December2015, PureTech reports a consolidated cashbalanceof approximately $314M

withapproximately$256MheldattheParentCompany• Aggregate Value of Growth Stage Business Holdings at 31December 2015 increased to $291.7M

from$222.4M,anincreaseof31.2percent*• PureTechhasaverageholdingsofapproximately73percentinitsbusinesses,andeffectivecontrol

overall

Pipeline/ClinicalHighlightsPureTechhas20clinicalstudiesacrossitsadvanced-stagepipeline.Anumberofsignificantadvancementswereachievedoverthecourseof2015,including:

• GelesisinitiatedaweightlosspivotaltrialforGelesis100andaccelerateditsclinicaltimelineforitsU.S.FoodandDrugAdministration(FDA)submissionbyapproximatelyoneyearfollowingpositiveconfirmation from the FDA that the study is a non-significant risk device study

• Akili completedapilot study inpaediatric attentiondeficithyperactivitydisorder (“ADHD”)whichshowed statistically significant improvements on multiple outcomes measuring attention,impulsivityandworkingmemoryinchildrenwithADHD

• Tal Medical enrolled the first subjects in a dose optimisation study and received positiveconfirmationfromtheFDAthatstudymeetsthenon-significantrisksafetystandards

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• The Sync Project initiated a clinical study of the impact of personalised music on athleticperformance,whichmayhaveimplicationsformanagementofandrecoveryfromconditionssuchasParkinson’sdisease,stroke,pain,andchronicfatigue

TeamHighlightsPureTechcontinuestoexpanditsteamtodrivegrowth,fillinganumberofkeyroles:

• PureTechappointedBoardmembersChrisViehbacher,formerChiefExecutiveOfficerofSanofi,andMarjorie Scardino, former Chief Executive Officer of Pearson, and named several distinguishedscientists,physiciansandindustryleaderstoitsadvisorynetwork

• PureTechsuccessfully recruited30outstanding individuals includingChiefFinancialOfficer,SeniorVicePresidentofCommunicationsandInvestorRelations,VicePresidentofCompanyDevelopmentand Operations, Vice President of Talent Acquisition and several seasoned entrepreneurs inresidence

• In 2015 and the first quarter of 2016, several senior leaderswere appointed, including the ChiefExecutiveOfficerandChiefTechnologyOfficeroftheSyncProject,ChiefScientificOfficerandHeadof Intellectual Property for Vedanta Biosciences and Vice President of Marketing for Tal Medical

NewBusiness&IntellectualPropertyIn2015,PureTechcreatedthreenewProjectPhasebusinesses.Additionally,theCompanynearlydoubleditspatentsandpatentapplicationsduringtheyear,with209attheendof2015

• Alivio Therapeutics is centred around a proprietary drug delivery platform for drugs that treatinflammationandunderlyingdisordersthatcauseinflammation

• Vor BioPharma is a preclinical immuno-oncology business that is developing novel targetedtherapies for cancer

• Sonde Health is developing a proprietary voice-based technology platform with the potential totransformthewaywemonitoranddiagnosementalandphysicalhealth

• FollicareceivedaNoticeofAllowancefromtheUnitedStatesPatent&TrademarkOffice(“USPTO”)forapatentrelatedtoitsprincipaltechnologyplatformtotreathairloss

PostYear-endHighlightsPureTechcontinuesitspositivemomentumin2016:

• InJanuary2016,Akiliraised$30.5M,whichincludes$8.5MfromoutsideinvestorsincludingJAZZVenturePartners,CanepaAdvancedHealthcareFund, tobe funded inapproximately twoequaltrancheswiththesecondtrancheexpectedtobefundedinSeptember2016

• In January2016,PureTechexpanded itsScientificAdvisoryBoardofdistinguishedscientistsandphysiciansandappointednewSeniorAdvisorstotheCompany

• InMarch 2016, Vedanta Biosciences signed a licence agreement with RIKEN, the University ofTokyoandAzabuUniversityfornewimmuneboostingmicrobiometechnology

• InMarch2016,Commenseadvanceditsdiscoveryanddevelopmentplatform,nameditsfoundingscientistsandadvisorsandexecutedanexclusivelicenceinthemicrobiomefield

Commentingontheannualresults,DaphneZohar,CEOofPureTechsaid:“2015wasasignificantyearoftransformationforPureTech.Wehave$314millioninconsolidatedcash,followingoursuccessfulIPOasaPremiumListedcompanyontheMainMarket,givingusastrongfinancialpositiontoexecuteourstrategy.

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“Wefurtherstrengthenedandexpandedourpipelinewhichisfocusedonareasofescalatingscientificandclinical importance, including those at the intersection of the immune, gastrointestinal and centralnervoussystems.Wenowhave20ongoingclinicalstudiesandwillhavemultiplepivotalstudyread-outsover the next two years. In addition to our advanced programmes,we have 15 exciting project phasebusinesses and concept phase initiatives that are progressing through our validation process.“Additionally,weentered intoagreementsandformedfournewpartnershipswith industry leadersandinfluencersandraisedexternalvalidatingcapital.VedantaBiosciencesenteredintoalicensingagreementwithJanssenwithupfrontandmilestonepaymentsupto$339million,TalMedicalandGelesisattractedanumberofnew investors and raisedanadditional combined$64million in successful fundraisings, andAkiliraised$30.5millioninthepostperiod.“Weenter2016witharobustpipelineandstrongfundamentals.Withouroutstandingteamandnetwork,wearewellpositionedtodeliversignificantvalueforourshareholders." PureTechtodayreleaseditsAnnualReportfortheyearended31December2015.IncompliancewiththeFinancialConductAuthority’sListingRule9.6.3, thefollowingdocumentshavetodaybeensubmittedtothe National Storage Mechanism and will shortly be available for inspection athttp://www.morningstar.co.uk/uk/NSM

• AnnualReportandAccountsfortheyearended31December2015;and• Noticeof2016AnnualGeneralMeeting.

Printedcopiesof thesedocuments togetherwith theFormofProxyhavebeenposted toshareholders.Copies are also available electronically on the Investor Relations section of the Company's website athttp://puretechhealth.com/investors-reports-presentations.php.PureTech’s 2016 Annual General Meeting will be held at 17.00 BST on Monday 9 May 2016 at theMondrianHotel,20UpperGround,LondonSE19PD,UnitedKingdom.PureTechwillalsoholditsfirstCapitalMarketsMeetinginLondononTuesday10May2016from13.00-17.00BST.Themeetingwill featurePureTechpresenters includingmembersoftheCompany'sBoardofDirectorsandmanagementfromtheCompany'soperatingbusinessunits.PleaseconfirmifyouwouldliketoattendtheCapitalMarketsMeetingtoPureTech.Event@fticonsulting.com*doesnotincludeholdingsin5projectphasebusinessesor10conceptphaseinitiatives,butdoesinclude$11.5M subsequently invested by PureTech in the first tranche of the Akili financing round in January2016.

AboutPureTechHealthPureTech Health (PureTech Health plc, PRTC.L) is a cross-disciplinary healthcare company developinginnovative products that could improve the lives of patients. PureTech is focused on areas of growingscientificandtechnical insightsthatitbelievesareatanimportantinflectionpoint, includingthecentralnervous, gastro-intestinal and immune systems, and the interactions and signalling between them.PureTechhasapipelineofmorethan30programmesandhasapproximately20clinicalstudiesacrossitspipeline, targeting multi-billion dollar market opportunities. PureTech’s advanced programmes includefivewithhumanproofofconceptandmultiplewithpivotalorregistrationstudyreadoutsinthenexttwoyears. PureTech's leading team and board, along with an advisory network of more than 60 expertfounder-scientists andadvisors acrossmultipledisciplines, givesPureTechaccess topotentially ground-

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breaking science and technological innovation. With healthcare undergoing major transformation,PureTechiswellpositionedtodevelopandlaunchmedicinesforthe21stcentury.Formoreinformation,visitwww.puretechhealth.comandconnectwithusonTwitter.

# # #Forfurtherinformationpleasecontact:

PureTech

Julie DiCarlo, Senior Vice President, Communications and InvestorRelations

+16174560032

FTI Consulting (Communications adviser to PureTech)BenAtwell/MatthewCole +44(0)2037271000

Notes

(i)Natureofannouncement

The financial information set out in this Annual Results Release does not constitute the company'sstatutoryaccountsfor2015or2014.AnyreferencestopagenumbersinthisannouncementaretopageswithintheAnnualReportandAccounts.Statutoryaccountsfortheyearended31December2015havebeenreportedonbytheIndependentAuditorandwillbedeliveredtotheRegistrarwhendue.

(ii)Forwardlookingstatements

ThisAnnualResultsReleaseandtheAnnualReportandAccountscontainstatementsthatareormaybeforward-looking statements, including statements that relate to the company's future prospects,developmentsandstrategies.Theforward-lookingstatementsarebasedoncurrentexpectationsandaresubjecttoknownandunknownrisksanduncertaintiesthatcouldcauseactualresults,performanceandachievementstodiffermateriallyfromcurrentexpectations,including,butnotlimitedto,thoserisksanduncertaintiesdescribedintheriskmanagementsection.Theseforward-lookingstatementsarebasedonassumptionsregardingthepresentandfuturebusinessstrategiesofthecompanyandtheenvironmentinwhich it will operate in the future. Each forward-looking statement speaks only as at the date of thisAnnual Results Release. Except as required by law, regulatory requirement, the Listing Rules and theDisclosureandTransparencyRules,neitherthecompanynoranyotherpartyintendstoupdateorrevisetheseforward-lookingstatements,whetherasaresultofnewinformation,futureeventsorotherwise.

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LetterfromtheChairmanPureTechisreinventingthepharmaceuticalindustry’straditionalapproachtodevelopingmedicines.Ourrelationshipswithglobalexpertsandinventorsandourcross-disciplinaryapproachandrigorousde-riskingprocess gives us a unique ability to bridge creative ideas and science and actualise the next potentialgame-changersinhealthcare.Inmyroleasanearlyparticipantinthedevelopmentofthetechnologyindustry,andmycurrentroleasthe Director of the Massachusetts Institute of Technology (MIT) Media Lab, I see the potential ofbiotechnology to touchevery aspect of our lives and to impact businesses across industries.When thedigital industry was founded, it was made up of vertically integrated, niche businesses that requiredsignificant investmentsandexpertiseandwhoseapplicationsdidn’t relate tomostof theworld.Today,technologyispartofoureverydaylives.Healthcare has traditionally been practiced by scientists and physicians looking for single moleculeinterventionsandperformingsurgeryinhospitals.Asourknowledgeofthehumanbodyincreases,wearebeginningtoappreciatetheinterrelatednatureofourbiologicalsystemsandtheconnectionbetweenouractivitiesandourhealth.Fromourbloodpressureandoxygenleveltoourbrainactivityandsleep,thereexisttodayoveradozentypesofdatathatcancurrentlybecollectedonourphysiologythroughwearablesensors alone. This introduces vast complexity as we think about our health, but also presents newopportunities.Some big breakthroughs are likely to come from unexpected sources and combinations. The future ofhealthcarewillincludenewplayersandtechnologiesthatwillchangethewaywemanageourhealthandhowwediagnose,monitor and treatdisease. I believe that PureTech is at a uniquenexuspoint at theforefront of a pioneering era in biology and medicine.Led by Daphne Zohar, our outstanding Chief Executive Officer and Co-founder, PureTech had amomentousyear.InJune2015,webecameapublicly-tradedcompanyinLondonwhereastronggroupofinvestors supportedour IPO inwhichwe raisednearly $200million. This transformed thepotential forPureTechandprovidesuswiththefundstoexecuteourstrategy.Wemademeaningfuladvancementsinourpipeline,signedonsignificantnewstrategicpartnersandclosedsuccessfulfundraisingroundsforourbusinesses.PureTech’s impressive Board ofDirectorswas further strengthened in 2015with the additions of ChrisViehbacher, former Chief Executive Officer of Sanofi, and Marjorie Scardino, former Chief ExecutiveOfficerofPearson.Wecontinuedtobuildourillustriousadvisoryteam,whichnowincludesmorethan60ofthebrightestmindsinscienceandtechnologyacrosstheglobe. Additionally, we established a Scientific Advisory Board of distinguished scientists and physicians whoworkcloselywiththeseniorleadershipteamandtheBoardofDirectorstoidentifynewareasoffocusandprioritise themes and new business concepts. The group, led by PureTech Board Adviser and NobelLaureateBobHorvitz,ismadeupofindustryandscientificleaders:

• DennisAusiello,M.D.,ChiefEmeritusofMedicineatMassachusettsGeneralHospitalandJacksonDistinguishedProfessorofClinicalMedicineatHarvardMedicalSchool;

• JimCollins,Ph.D.,TermeerProfessorofMedicalEngineering&ScienceandProfessorofBiologicalEngineeringatMIT;

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• SamGambhir,M.D.,Ph.D.,LudwigProfessorandChair,DepartmentofRadiologyandDirectoroftheMolecularImagingProgramatStanfordUniversity;

• Raju Kucherlapati, Ph.D., PureTech Board member, Paul C. Cabot Professor of Genetics andProfessorofMedicineatHarvardMedicalSchool;

• BobLanger,Sc.D.,PureTechCo-founderandBoardmember,DavidH.KochInstituteProfessoratMIT;and

• Ed Boyden, Ph.D., optogenetics pioneer, professor of Biological Engineering and Brain andCognitive Sciences at theMassachusetts Institute of Technology (MIT)Media Lab and theMITMcGovernInstitute.

PureTechalsocontinuedtoexpand itsmanagementteaminsupportof theCompany’sgrowth.Daphnehasbuiltaworld-classteamthatcontinuestostrikeadelicatebalancebetweencultivatingcreativenewideasanddriving scientific and clinical rigour.Wehave started2016withgreatmomentumandwithafocusonexecution.I’mexcitedbyouroutlookforwhatliesahead.Just as thedigital revolutionmade technology relevant to all of us, I’menergisedby thepossibility foradvancements in biotechnology to change our everyday lives. As Nicholas Negroponte, the founder of theMITMediaLab,said,“Bioisthenewdigital.”Thankyou for your continued supportaswebuildanewkindofhealthcare company,bringinganovelapproachtoharnessinginnovationtoimprovepatients’lives.

JoichiItoChairman

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StrategicreportLetterfromtheChiefExecutiveOfficerThis is a new era of healthcare and we have built a company ideally positioned to launch new classes oftherapeutics that will be quite different from the medicines of the last century. Increasing patientengagement, the changing regulatory environment and a growing emphasis on drug safety and pricingrequireanewapproachtotraditionaldrugdevelopmentparadigms,whileasurgeinscientificknowledgeand technological innovation allows us the opportunity to develop new treatment and preventionparadigmsforthe21stcentury.PureTechhasbuiltanewmodeltodevelopthenextgenerationofmedicinesthatwebelieveisuniquelysuited to this changing landscape.Wehavea robustandadvancedpipelineofprogrammes focusedonnovelapproachestotargetingsignificantunmetmedicalneedsandlargehealthcaremarkets.In2015,ourfirst yearasa listed company in theUK,we raised$196millionandcontinued toadvanceourpipelinewhilerapidlygrowingourorganisationinpreparationforthecommercialisationofourproducts.TheopportunityChronicdiseasesaccount for86percentofallhealthcarespendingandat least sevenof the10 leadingcausesofdeath.Yetourmodernhealthcaresystemisstructuredwithanacutedisease-focusedmind-setandcontinuestobeplaguedbyproductivitydeclines.The healthcare industry excels at pattern recognition, looking at past history to predict future success.However, truly novel approaches to disease management and treatment, those that will change theparadigm, will most likely stem from creative approaches that, by definition, break free from patterns.AtPureTech,weareworkingwithglobalexpertsacrossdisciplinestotarget“bluesky”opportunities.Weare focusedonhealthcaremarketswithmulti-billiondollarpotential, if successful.PureTech’sapproachenables us to discover ground-breaking and often unexpected innovations, not confined to specificdisciplines or geographies. We rigorously filter opportunities in pursuit of only those that have thepotential to have a big impact on healthcare addressing a major unmet need, are highly novel andprotected by strong intellectual property, and are vetted by the leading experts in their fields. Ourstructureallowsustodiversifyriskandattractthebrightestmindstohelpuscreateandlaunchmedicinesforthe21stcentury.Atransformationalyear2015wasatransformativeyearforPureTech.We raised grossproceedsof approximately $248million, including$196million inour successful initialpublicofferinginJune2015,providinguswiththefundstodeliveronourstrategy.Weentered intoagreementsand formedpartnershipswith industry leadersand influencersand raisedexternalvalidatingcapital:

• VedantaBiosciencesenteredintoa licensingagreementwithJanssen,asubsidiaryofJohnson&Johnson,withupfrontandmilestonepaymentsupto$339million;

• Akiliestablishedacollaborationwith leadingpatientadvocacygroupAutismSpeaks,buildingonthecompany’srelationshipswithShirePharmaceuticalsandPfizer;

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• Karuna Pharmaceuticals received a Translation Fund Award of up to $3.8 million from theWellcomeTrust;

• The Sync Project formed partnerships with internationally-renowned organisations BerkleeCollegeofMusicandHINTSAPerformance;and

• TalMedicalandGelesisattractedanumberofnewinvestorsandraisedanadditionalcombined$64millioninsuccessfulfundraisings.

Importantly,wemadesignificantprogressacrossourpipelinein2015,including:

• Akili completedapilot study inpaediatric attentiondeficithyperactivitydisorder (ADHD)whichshowed statistically significant improvements on multiple outcomes measuring attention,impulsivityandworkingmemoryinchildrenwithADHD;

• Gelesis initiated a weight loss pivotal trial for Gelesis100 following a non-significant riskdesignationfromtheU.S.FoodandDrugAdministration(FDA)andaccelerateditsclinicaltimelineforFDAsubmissionbyapproximatelyoneyear;

• Tal Medical enrolled the first subjects in a dose optimisation study and received positiveconfirmationfromtheFDAthatstudymeetsthenon-significantrisksafetystandards;

• FollicareceivedaNoticeofAllowancefromtheUnitedStatesPatent&TrademarkOffice(USPTO)forapatentrelatedtoitsprincipaltechnologyplatformtotreathairloss;and

• The Sync Project initiated a clinical study of the impact of personalised music on athleticperformance,whichmayhaveimplicationsformanagementofandrecoveryfromconditionssuchasParkinson’sdisease,stroke,pain,andchronicfatigue.

Wealsocontinue todevelopourearly-stagepipelineaswebuild for the future,withnewprogrammesundergoingquietde-riskingexperimentsandourdiscoveryteamworkingcloselywithleadingscientistsonthe next big ideas. We are progressing Commense, which is focused on early childhood microbiome,SondeHealth,which isdevelopingvoice-based tools for thepassiveassessmentand trackingofpatienthealth,Alivio,whichisdevelopingaproprietarydrugdeliveryplatformfordrugsthattreatinflammationand underlying disorders that cause inflammation, and Vor, which is developing targetedimmunotherapies for cancer. Additionally,we are currently exploring and de-risking new opportunitiesacross10conceptphaseinitiatives.

WehaveattractedsomeofthebrightestmindstoPureTechasweexpandourteamtodrivecontinuedgrowth. In addition to our new Board members Chris and Marjorie, we’ve successfully recruited 30outstanding individuals in 2015. We’ve attracted top talent for a number of key roles at PureTech,including Chief Financial Officer, Senior Vice President of Communications and Investor Relations, VicePresident of Corporate Development, Vice President of Talent Acquisition and several seasonedentrepreneursinresidence.We’vealsoappointedseniorleadersincludingtheChiefExecutiveOfficerandChiefTechnologyOfficeroftheSyncProject,ChiefScientificOfficerandHeadofIntellectualPropertyforVedantaBiosciencesandVicePresidentofMarketingforTalMedical.FocusonexecutionWearenowwellpositionedtoexecuteagainstanumberofsignificantmilestonesin2016andbeyond.20clinicalstudiesareadvancingthroughourpipeline.Overthenexttwoyears,wehavemanycatalysts,includingtheexpectedcompletionofmultiplepivotalorregistrationstudiesandsixclinicalhumanproof-of-conceptstudyread-outsaswellasoveradozenexploratoryandpilotstudies.While inevitablysometechnologieswillnotadvance tocommercialisation,ourapproachpreservesouroptionsasmostof the

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cashresidesonaPureTechParentCompanylevel,enablingustobackthewinners.Ourmodelalsogivesusmanyshotsongoalwithindependenttechnologies,avoidingthebinaryriskofatypicalsingleplatformbiotechnologycompany.We’ve started 2016 well, including Akili’s $30.5 million successful financing as well as Vedanta’s newlicenceagreementandChiefScientificOfficerappointment.Asweprepareforthelaunchofourfirstproducts,we’veexpandedourreimbursementandcommercialexpertise with the addition of industry veterans on our advisory team, including Harry Leider, ChiefMedical Officer of Walgreens Co., Rob Perez, former CEO of Cubist, and Sachin Jain, Chief OperatingOfficer and Chief Medical Officer of CareMore Health and former Chief Medical Information andInnovationOfficeratMerck.Weenter2016witharobustpipelineandstrongfundamentals.Withourfantasticteamandnetwork,wearewellpositionedtodeliversignificantvalueforourshareholders.Weappreciatethetremendousresponsetoourinitialpublicofferingandaredelightedtohavemetandinvolvedsomanyterrificnewinvestorsthroughouttheyear.Thishasbeenaremarkableyear,andweareevenmoreexcitedaboutourfuture.DaphneZoharChiefExecutive

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HowPureTechaimstobuildvalueforinvestorsTargetingmarketswithlargeunmetmedicalneedsthatwillbenefitfromadisruptiveapproach,PureTechworkswithitsdistinguishedBoardofDirectorsandScientificAdvisoryBoard,alongwithanunparalleledcross-disciplinary group of more than 60 expert advisors and global leaders in their fields, to identify andaccesspotentiallyground-breakingscienceandtechnologicalinnovationaheadofothers.PureTech’s process couples big science ideas with rigorous testing, de-risking technologies throughexperimentsthataredesignedtoprobethekeyunansweredquestions.ThebenefitsofPureTech’sstructurePureTech’sstructurehassignificantadvantagesovertraditionalpharmaceuticalcompanies:

• Each technology is housed in an independent business at the time that intellectual property islicensedorcreated,enablingthemanagementandadvisorsofthatbusinesstobecompensatedviaequityinthebusinessestheyareworkingon.

• Decisions about how to allocate funding to different programmes are made by the PureTechsenior leadership and Board of Directors, whose primary compensation is through PureTech,therebyensuringcompletealignmentwithPureTech’sshareholders.

• PureTech has a strict stage-gating of funding allocation,with approximately $350,000 allocatedduringthe“concept”phase,approximately$2millionallocatedduringthe“project”orde-riskingphase, and such amount allocated during the “growth” stage as the Board of Directors ofPureTech shall approve based upon the businesses’ operating plan, potential value inflectionmilestonesandbudget.

PureTechcurrentlyhas10conceptphase initiativesandfiveprojectphasebusinessesquietlyadvancingtechnologies through this de-risking process. PureTech does not include its concept and project phaseassetsinitscalculationofthevalueoftheAggregateHoldingsofitsgrowthstagebusinesses.

Emerging from this process, PureTech has seven growth stage businesses focused on developinginnovativemedicinesinbilliondollarhealthcaremarketsandhasownershiporexclusivecontrolover200patentsandpatentapplications.PureTechhasprogressedand increasedsupportof thesebusinessesasthey achieved external validation including strategic partnerships, outside funding, technology proof ofconceptand/orpeerreviewinprestigiousscientificjournals.The Company fully expects that even these de-risked programmes will experience some attrition andPureTechmaintainsthecashanddecisionmakingoptionalitytosupportthemostpromisingprogrammesastheygrowanddevelop,allocatingcashtothosethataresuccessfulwhenothersaredeprioritisedbasedonclinicalresults.PureTech isdeeplypassionateabout improvingthe livesofpatients,witha focusonoperatingwiththehighestlevelofintegrityandcommitmenttolongtermshareholdervalue.SafeandefficaciousapproachestochronicandinfectiousdiseasesareurgentlyneededIn 2014, global health care costswere estimated to average 10.5 percent of Gross Domestic Product1.Chronic diseases, such as those impacting the central nervous system (e.g. depression, schizophrenia,ADHD, autism), the immune system (e.g. oncology, auto-immune disorders) and the gastrointestinalsystem(e.g.obesity,diabetes,metabolicdisease)representtheleadingcauseofmortalityintheworld2.

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PureTechisfocusedontheseareasofneedaswellasonadjacentareaslikeinfectiousdiseaseswhicharerecognisedasaseriousglobalthreatbytheWorldHealthOrganisationduetogrowingbacterialresistancetoexistingantibioticsandadearthofnewtherapiesonthehorizon.The barrier to innovation is increasing with regulators’ and society’s greater emphasis on safety andperceivedvalue.Adversedrugreactions(ADRs)associatedwithconventionaldrugshavebeenestimatedtopotentially cost inexcessof$130billionperyear3,50percentof totalannualprescriptioncosts4.Allnewmedicineswillbechallengedtoadheretohighersafetystandards.Atatimewhentheneedfornewsafeandeffectivemedicinesisenormous,thepharmaceuticalindustrycontinuestostrugglewithan“innovationgap”.PharmaceuticalR&Dreturnsdeclinedfrom10.1percentin2010to4.2percentin20155.PureTech believes traditional models must evolve to drive healthcare innovation. For example, acompellingandunconventionalapproach takenbyPureTech includesutilising technologies toprovidea‘drug-likeeffectwithoutdrugs’,leadingtocreationofnewclassesofmedicineswithdrug-likeefficacyandaveryhighintrinsicsafetyprofile.Cross-disciplinaryR&DcontinuestodrivemedicalinnovationThechallengetodevelopingnewandsafemedicineswilllikelyfindsolutionsincross-disciplinarythinking,whichhashistoricallyspawnedmajormedicaladvances.Growingareasofimportancetomedicineincludethemicrobiome,whichwasonceintherealmofthefoodindustrybutisnowbeingwidelyrecognisedforitscriticalroleinareaslikeimmunity,hostdefenceandmetabolism.Recently,bacterialbiologygaveriseto CRISPR-based genome editing tools with wide-ranging health applications including cancer, geneticdisease and drug discovery. The discovery of novel functions of exosomes opened a new frontier in cellsignallingandenablesnewstrategies fordrugdelivery. Languageprocessing technologiesdeveloped tosafeguardcybersecurityhavedemonstratedpotentialindetectingvocalbiomarkersfordisease.With most biopharma companies operating within silos, PureTech’s approach of going between andbeyond existing disciplines is a key differentiator and central to PureTech’s discovery and preclinicalprocesswhichisexpectedtoyieldtwotofournewprojectphasebusinessesperyear.Digitalmedicinesholdpromiseforsafe,patient-centredcareDigital medicine is a rapidly maturing cross-disciplinary field that possesses exceptional potential fordevelopingeffectiveandsafediagnosticsandtherapeutics.Drivenbytheconvergenceoftechnologyandhealthcare, non-traditional players are changing the healthcare M&A landscape. Fifty percent of theFortune50companiesenteredthehealthcaremarketin20136.Companies,includingAlphabet(Google),Nestlé,Apple,Samsung,Alibaba,IBMandWalmartnowhavesignificantstakesinthehealthcarearena.Ongoing, no- or low-burden monitoring, and the delivery of customised, just-in-time therapeuticinterventionsinnon-criticalsettingsprovidetremendouspotentialtoalterhow,whenandwherewetest,diagnoseandmanageourhealth.Justascombiningcontinuousglucosemonitorsand insulinpumpsalloweddiabeticspreciseclosed-loopcare,digitalmedicine could realise closed-loopcare for cognitivedisorders includingADHDandautism,mental health conditions, sleep, pain, post-traumatic stress disorder, traumatic brain injury andParkinson’sdisease,amongothers.Suchinterventionscouldpotentiallyavertcatastrophichealthevents

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thatrequirehospitalisation,aligningwiththecostsavingincentivesofhealthcareproviderstransitioningtovalue-basedreimbursement.Theriseofthewell-informedpatient-consumeroffersagrowingmarketfordigitalmedicineinadditiontotraditional payers. Healthcare is the fastest growing on-demand sector, reflecting heavy emphasis onpatients’valuesofconvenience,simplicityandspeed,withannualinvestmentgrowingatacompoundedannualgrowthrateof224percent from2010 to2014which isexpected toquadrupleby20177.Digitalmedicine could become of central importance as healthcare evolves towards a patient-centred,preventionparadigm.Surgeinhealthcaredealslikelytofunneltowardconvergent,clinicallyvalidatedapproachesThehealthcaresectorledglobalmergersandacquisitionsvaluedatmorethan$723billionin2015,up66percentover 2014. Following closelybehindwas the technology sector,withmore than$713billion inM&Ain20158.The convergence of technology and health presents two new and significant sources of funding andpartnershipsforlifesciencesstart-ups:traditionalpharmaceuticalcompaniesandnon-traditionalplayers.Pharmaceutical companies are transitioning to a fully centralisedmodel and they are looking to boostproductivity by outsourcing innovation and R&D to smaller companies. Non-traditional players areentering healthcare with deep pockets, wanting to establish early dominance in the gap betweenconsumerexpectationsandmedicalinfrastructure.Start-upswithastrongunderstandingofscience,experiencenavigatingregulatorypathwaysandclinicalsector expertise will possess a strong advantage in this new era of converging disciplines. PureTech isproactively tackling this with strong management understanding of multiple sectors, leveraging rapidprototyping and big data to achieve clinical validation for medical applications, reimbursement andrevenues.1:WorldHealthcareOutlook,EconomistIntelligenceUnit,August14,20132:WorldHealthOrganizations:http://www.who.int/topics/chronic_diseases/en/3:Pharmacoeconomics,1999,http://www.ncbi.nlm.nih.gov/pubmed/105379624:TotalRetailSalesforPrescriptionDrugsFilledatPharmacies,2014http://kaiserf.am/1XO68HF5:DeloitteLLP,Measuringthereturnfrompharmaceuticalinnovation20156:Strategy+Business.TheFutureofHealthisMore,Better,Cheaper.http://bit.ly/1uEJ1FT7: Accenture. Healthcare: For Here or To Go? http://bit.ly/1QXTm988:Dealogic.GlobalM&AVolumeSurpasses$5tnfortheFirstTimeonRecord.http://bit.ly/1pODgjV

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PureTech’sdifferentiatedapproachTargetingareasofgrowinginsightandsignificantneedPureTech focuses on areas of accelerating biological insight and innovation coupled with substantialmedicalneed.TheCompany’scurrentprogrammesareprimarilydirectedtothreesuchareas–thecentralnervous system (CNS), the immune system, and the gastrointestinal system (GI) – along with theinterfacesandinteractionsbetweenandamongthosesystems.Forexample,thehumanmicrobiomeisasignificantareaoffocusforPureTechwithapplicationsthatspanacrosstheGI-CNS-immuneaxis.Across these areas and interfaces, PureTech is exploring creative, and often unexpected,modalities ofimpacting human health outside of traditional drug development strategies. In particular, we aredeveloping therapieswith thepotential todemonstrate ‘drug-likeeffectswithoutdrugs’ andadvancingengineeringinspiredbybiology.“Drug-likeeffectswithoutdrugs”Digitalmedicineshowsgreatpromise in itspotential toachievetheefficacyofpharmaceuticalswithanimproved safety profile. PureTech has invested a considerable effort in digital medicine, which theCompany defines as digital therapeuticmodalities that canmodify the course of a disease ormedicalcondition.Akili,theSyncProjectandSondehaveresultedfromthisfocusarea.Additionally,PureTechispursuingthepotentialfornewmodalitieswithdrug-likeefficacyandaveryhighintrinsicsafetyprofiletobe delivered to large markets like depression, cognitive disorders and obesity. PureTech has beenencouraged by the regulatory feedback in these areas with TalMedical, Gelesis and Akili all receivingpositive feedback from FDA regarding their plans and the safety profiles of these approaches enablingaccelerated paths to market compared to drugs.EngineeringinspiredbybiologyPureTechisapplyingbiologicalprinciplestodevelopnewengineeringsolutionsformedicine.Forexample,Entrega’splatformtodeliverinjectabledrugsorallyisbasedonanewencapsulatedmuco-adhesivepatchand theGelesis encapsulateddevicewasenabledby abreakthrough inpolymer science.Also,VedantaBiosciencesisdevelopingoneofthefirstdrugsbasedondefinedcocktailsofmicrobesthatoccurnaturallyin the gut for the treatment of autoimmune conditions, infectious diseases and allergies. PureTech isdeveloping anumberof new initiatives in synthetic biology, co-optingnatural systems tobetterdesignanddeliverdrugs.AnewkindofhealthcarecompanyAdvantagesofPureTech’sstructure&processPureTech’s programmes originate from a systematic and rigorous theme-driven process. First, theCompany identifies a theme – an area of significant unmet medical need where there exists rapidlyemergingscientificresearchandthepotentialforpotentiallydisruptivesolutions.PureTechthenrecruitsleadingscientiststoestablishathemespecificScientificAdvisoryBoard(SAB).TheCompanyworkswiththeSABtocultivatenewideasandevaluatepotentialtechnologies,toprioritiseandonlypursuethosewithstrongscientificbasisandcommercialandclinicalpotential.PureTechperformsanunbiased analysis of hundreds of scientific discoveries focused on the particular healthcare problem –

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morethan650peryear–andworkswiththeleadingexpertsinthattherapeuticortechnologyareaandcomplementary fields to select themost promising breakthroughs to advance. This unbiased approachproactivelyinvolvesperspectivesfromotherfields–areflectionofPureTech’srecognitionthatimprovinghealthisacross-disciplinaryendeavour.

Upon selecting and in-licensing the most promising technologies, PureTech typically pursues furtherintellectualpropertyprotectionandconductsexperimentstovalidatethetechnologies.Throughoutthisprocess, it manages the new project phase businesses while building a growth leadership team andprovidingcapitaltofunddevelopment.Finally,projectphasebusinessesarematuredtothegrowthstageuponachievingkeymilestonesthatgrantstrongexternalvalidationoftechnologyandunlocknewfundingavenues.This processhas resulted in an advancedpipelineof sevengrowth stagebusinesses, fiveprojectphasebusinesses and 10 concept phase initiatives. The Company plans to launch an additional 2-4 newbusinesses per year. Across PureTech’s pipeline in the next two years, six additional human proof-of-conceptstudiesandmultiplepivotalorregistrationstudiesareexpectedtoread-out.Biotech-likeupsidewithoutthebinaryriskprofileThechanging faceofhealthcare innovationrequiresnew infrastructures tobringpromisingsolutions tomarket.PureTech’sapproachhasthepotentialupsideofbiotechnologywhilediversifyingitsrisksimilartoa pharmaceutical company. The Company’s structure has significant advantages over pharmaceuticalcompaniesasprogrammesarehousedinindependentoperatingcompaniestomaximisegrowthflexibilityandalignmanagement incentives.This structureenablesPureTech to issueequity to the leadersof thespecificbusinessesandenablesthoseleaderstofunctioninanentrepreneurialway,withallofthesamemotivating factors as in an independent biotechnology business. At the same time, PureTech’s sharedexpertiseandinfrastructureacrossitsbusinessesprovidescapitaldisciplineandlimitsthemostcommonrisks associated with biotech, allowing PureTech to build value and divert cash to its most successfulprogrammesasmilestonesareachieved.PureTech’sBoardofDirectorsandseniorleadershipteamarefocusedondrivingthegreatestvalueforitsshareholders. As growth stage businesses near the stage of harvesting, PureTech focuses on scenarioplanningtomaximisevalueforPureTechanditsshareholders.Insomecases,aninflectionpointfollowedby an attractive acquisition offermay be the optimal way to increase value, while in other cases, thelaunchofaproductwithmulti-billiondollarpotentialmaybethe idealoutcome. In launchingproducts,PureTech’s leadership teamwill consider benefits of commercial partnerships that help to drive value.PureTech’s decision-making group is compensated primarily through equity at a PureTech level and isthereforecompletelyalignedwithPureTechshareholderstomakedecisionsthatwilldrivethemostvaluefor these shareholders. PureTech generallymaintains themajority share of the equity in its businessesandcontrolstheunderlyingbusiness’sboardofdirectorstodirectthestrategyofthebusiness.

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ManagementandnetworkIndustry-leading,cross-disciplinaryteamPureTech’s recognition that improving health is a cross-disciplinary endeavour drives its approach tosolvingproblems.PureTech’semployeesandDirectorshavecollectivelybeeninvolvedinthedevelopmentofdrugs,medicaldevicesandtechnologieswhichhavebeencreditedwithanimpactonmillionsofpeopleand in the launch of multi-billion dollar companies. This wealth of experience is further boosted byPureTech’s senior advisors, expanded in 2015 to include Dr. Harry Leider (Chief Medical Officer ofWalgreensCo.),Dr.DavidEdwards(theGordonMcKayProfessorofthePracticeofIdeaTranslationattheHarvard John A. Paulson School of Engineering and Applied Sciences), Dr. Donald Ingber (FoundingDirectoroftheWyssInstituteforBiologicallyInspiredEngineeringatHarvardUniversity),Dr.SachinJain(Chief Operating Officer and Chief Medical Officer of CareMore Health and former Chief MedicalInformationandInnovationOfficeratMerck)andMr.RobertPerez(formerCEOatCubist).Finally, thePureTechmultidisciplinaryScientificAdvisoryBoardwasestablished in2015,withexperts inareas ranging from synthetic biology (Jim Collins, Ph.D., Termeer Professor of Medical Engineering &ScienceandProfessorofBiologicalEngineeringatMIT), tooptogenetics (EdBoyden,Ph.D.,professorofBiologicalEngineeringandBrainandCognitiveSciencesattheMassachusettsInstituteofTechnologyMITMedia Lab and the MIT McGovern Institute), to medical imaging (Sam Gambhir, M.D., Ph.D., LudwigProfessorandChair,DepartmentofRadiologyandDirectoroftheMolecularImagingProgramatStanfordUniversity).Eachmemberwaschosenfortheir leadership intheirrespectivefields,andsharedvision inaddressingmajorhealthcareproblemsinunexpectedways.Additionally, PureTech has selected its experienced team of employees for their creativity andentrepreneurial skills from a pool of candidates from top institutions. In addition to extensive healthcareexpertise, PureTech’s internal team comprises cross-disciplinary specialists with expertise in life,computerandphysicalsciencesaswellaschemicalandbiomedicalengineering.Industry-leadinginternationaladvisorynetworkAlongside PureTech’s internal team, the Company has established an international advisory networkcomprisingmorethan60expertsacrossmultipledisciplines.Theadvisorscontributeindividualexpertiseand also function as part of a broader, collaborative network. The Directors believe that this networkprovidesPureTechwithaccesstosomeofthemostpromisingtechnologieswithinatheme,atthestagewheretheyarefirstbeingexploredinthelaboratoriesoftheirorigin.Forexample,theseleadingscientistsoften introduce PureTech to up-and-coming scientists and researchers who are potentially makingbreakthroughs in a particular field. This network enhances PureTech’s ability to evaluate and validatethosetechnologiesthatitbelievesshowstrongcommercialandclinicalpotentialandultimatelyfocusonaselect fewof someof themostpromisingwithin the selected theme.PureTech’s advisorynetworkhasinternational reach, complementing PureTech’s extensive relationships within Boston’s healthcarecommunity.

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StrongfundamentalsPureTech’sdifferentiatedbusinessmodelallowsfortheCompanytosupportitsexistingbusinesseswhileactively identifying new technologies. PureTech invests in the growth of its businesses in a disciplinedmanner and its model affords the Company the ability to build value and allocate funds to its successfulbusinessesasmilestonesareachieved.Havingraisednetproceedsof$236millionduring2015,PureTechiswell-positionedtoachieve its strategicgoals,withapproximately$256millionofcashandshort terminvestments at 31 December 2015. These funds enable PureTech to drive forward its growth stagebusinessestomajormilestones.ThiscapitalalsoenablesPureTechtodevelopitsinternalinfrastructureaswellastobuildandscaleitspipeline.PureTech’sgrowthstagebusinessesmaintainastrongcashposition,with PureTech and outside investor funding, reflected by the consolidated cash and short terminvestmentsofapproximately$313.7million.One of PureTech’s competitive advantages is its institutional expertise in creating innovative newtherapeuticsanddrivingtheirgrowththroughstrategic,operationalandfinancialleadership.AsimportantasPureTech’sstrongcashpositionisitsabilitytobuilditspipelinethroughtheeffectivemanagementandgrowth of its businesses. With a structure to incentivise the teams that drive forward its variousbusinesses,PureTechguides thedirectionof itsbusinesses tohelpmaximisevalue for its shareholders.PureTechhasaverageholdingsofapproximately73percent in itsbusinesses,andeffectivecontroloverall.PureTech’s strong cash position in conjunction with its controlling stakes in its businesses provides italternativeswith regard to funding itsbusinessesandoptimising its capitalallocationstrategy.Since itsbusinessesaregenerallymajority-owned,PureTechhastheflexibilitytotunethelevelofoutsidefundingforeachbusinessdependingonmarketconditionswithanemphasisonthose investorswhocontributevalue beyond capital. With a keen focus on long term returns, PureTech is also able to take advantage ofmarket movements. For example, when partners and investors are highly enthusiastic about certainhealthcaresectors,PureTechcanattractrelativelyinexpensivecapitaltobusinessesexploringthoseareas.Inparticular,asitsgrowthstagebusinessescontinuetoadvance,cashinflowscouldcomefromanumberofsources,includinglaunchofproducts,licensingrevenue,royalties,aswellassaleofabusiness.PureTechhastheabilityto influencethestrategicdirectionofeachof itsbusinesses,withthePureTechBoardofDirectorsandseniorleadershipsittingontheunderlyingbusinessboardsaspartoftheirrolesinPureTech.ThisallowsPureTechtotakeaholisticviewofcapitalallocationacrossitsbusinesses,withthegoalofmaximisingvalueforitsshareholders.Finally, an important advantage of PureTech’s business model is its diversification of technical risk.PureTech’s businesses have relatively independent risk profiles, whichmeans that as some businessesreach de-risking milestones, including potentially negative results, PureTech can choose to divert itscapitaltobackthepotentialwinners.Asaresult,PureTechisprotectedfromfundinghigh-risk,low-returnassets,andcandirectitsfundstowardsitsbusinessesthathavedemonstratedtechnicalsuccessorhaveahigherpotentialformeaningfulreturns.

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ExternalvalidationValidatingPureTech’stechnologiesthroughpartnershipsandexternal financings isasignificantstrategicgoal for PureTech. During 2015, businesses in PureTech’s pipeline formed four partnerships, includingthose with Janssen, a subsidiary of Johnson & Johnson, and with Autism Speaks, and closed five fundingrounds with external partners. PureTech’s businesses also continued to successfully progresscollaborations with Pfizer and Verily, Google’s life sciences division. Data supporting PureTech’sbusinesseshavebeenpublishedintop-tierscientificjournalssuchasScienceandNature.InJanuary2015,VedantaBiosciencesenteredintoapartnershipwithJanssen,asubsidiaryofJohnson&Johnson,out-licensingoneproductcandidate,VE202forupto$339million inanon-refundableupfrontandmilestonespayments,plusroyaltiesoncommercialsalesfromthehighsingledigitstothelowteens.ThispartnershipallowedVedantaBiosciences to furtherdevelop itsplatformwithnon-dilutive funding,preservingPureTech’sequitystakeandallowingPureTechtomaintainacontrollinginterest.Inadditiontothe funding thepartnershipprovides, it also allowsVedantaBiosciences to leverage the resourcesof alarger partner to drive forward the development of VE202. Vedanta Biosciences has a platform withmultipleadditionalproductcandidates.AkilienteredintoapartnershipwithAutismSpeaks,aleadingautismscienceandadvocacyorganisation.This partnership allowed Akili to receive non-dilutive funding to support a controlled clinical study todeterminetheefficacyofAkili’scognitivegaminginterventionplatforminchildrenwithco-occurringhigh-functioningautismandADHD.HavingrelationshipswithpatientadvocacygroupslikeAutismSpeakswillbe beneficial in building market awareness for Akili’s product candidate. Along with Akili’s previouslyformedrelationshipswithPfizerandShire,thisrepresentsstrongvalidationofourtechnology.During 2015, Gelesis (twice), Tal Medical, Follica, and Karuna all closed financing rounds with externalpartners,withAkiliclosingaroundpost-periodend.Externalfinancingroundsprovidefurthervalidationforthetechnologyplus,inthecaseofequityfinancings,validationofthebusinessvalues,aswasthecaseforGelesis,Akili, andTalMedical. In July2015,Karuna received theWellcomeTrust’s TranslationFundAward, comprising a low-interest, unsecured convertible note of up to $3.8 million to fund Karuna’scombinationproof-of-conceptstudy,todemonstratethepotentialofKaruna’sleadtherapy,KarXT.

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AdvancedpipelinePureTech has a robust pipeline of programmes, which has significantly progressed over the course of2015, with several of PureTech’s businesses approaching commercialisation stage. PureTech’s mostadvanced businesses are considered growth stage, and are formally valued at the conclusion of everyyear. PureTech’s earlier stagebusinesses are consideredprojectphaseand conceptphase, andarenotincludedintheownershipadjustedvalueofourgrowthstagebusinesses.GrowthstagebusinessesGiventheprogressofPureTech’sgrowthstagebusinesses,PureTech’sownershipadjustedvalueofthesebusinesseshasincreasedby$69.3millionor31.2percent,from$222.4millionto$291.7million,includingthefirsttrancheoftheAkilifinancingwhichclosedinJanuary2016.TheincreaseinPureTech’sownershipadjustedvalue,netofnewinvestmentsbyPureTech,wasapproximately$46.3million,orapproximately20.8percent.Late-stagepipelineBothAkili andGelesisare funded through the read-outof theirpivotal studies in the firsthalfof2017,with sufficient funding to also begin commercialisation activities as they prepare for product launcheswithinthenexttwoyears.Gelesismaypotentiallyhavea3-monthproof-of-conceptstudyread-outinthesecondhalfof2016forGelesis200,andalsohastwoongoingmechanisticstudiesforGelesis100.Beyondits pivotal study in ADHD, Akili is also exploring its product in nine separate clinical studies. Follica isprogressingtowardsitsregistrationstudy,andisexpectedtoinitiateitsregistrationstudyinthesecondhalfof2016.

Mid-stagepipeline(clinical)Tal Medical has two ongoing randomised controlled studies with a total planned enrolment of 210patients expected to read-out in the third and fourth quarters of 2016, respectively, that are theequivalentofPhase2bstudies.Ifsuccessful,thesestudiescouldserveasthebasisforinitiatingapivotalstudy.TalMedicalalsohasfiveongoingresearchprojectstobetterunderstandthemechanismofactionof lowfieldmagneticstimulationandpossibleapplications inother indications.Karunaplanstohaveits60-patientstudyread-outbytheendof2016.PreclinicalpipelineVedantaBiosciencesandEntregabothalsomadesignificantprogresstowardstheclinic in2015.VE202,licensed to Janssen, is expected to enter the clinic in the first half of 2017. VE303 has demonstratedefficacyinanimalmodelsofC.difficileinfections,andmayalsoentertheclinicwithinthenextyear,andthere are multiple other candidates in other indications including autoimmune, allergy and oncology.Entrega has further refined its drug delivery platform technology through large animal studies, andexpectstohaveadatasetavailabletoannounceinthesecondhalfof2016.ProjectphaseandconceptphaseUnlikeitsgrowthstagebusinesses,PureTech’sprojectphasebusinessesandconceptphaseinitiativesarenot assigned values by PureTech, but form the basis of PureTech’s next growth stage businesses.PureTech’spipelineisalsoprimarilyfocusedonthreetherapeuticareasofacceleratingbiological insight

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and substantial unmet medical need – the central nervous system, the immune system, and thegastrointestinaltractandassociatedmetabolicsystem–and,despitenotbeingformallyvalued,themostadvancedofthesearenowclinicalstageandalreadyhavestrongteamsinplace.Valuation of PureTech’s growth stage businessesAll of PureTech’s growth stage businesses are currently majority owned, except for Gelesis in whichPureTech holds approximately 22.5 percent on a diluted basis and is also a co-inventor with rights toroyalties upon launch. All growth stage businesses are fully consolidated in PureTech’s consolidatedfinancial statements prepared in accordance with IFRS. As a result, the consolidated statements offinancialpositionincorporatedwithinPureTech’sconsolidatedfinancialstatementsdonotincludecurrentvaluations of the growth stage businesses. As a means of promoting transparency, the Directors alsopresent,assupplementaryinformation,ownershipadjustedvaluationsofthegrowthstagebusinessesinaggregate.ThisvaluationdisclosurehasbeenpreparedonthebasisoftheAICPAGuidelines.TheAICPAGuidelinesdonotrepresent,butareconsistentwith,valuationprinciplesadoptedunderIFRS.Thegrowthstagebusinessvaluationsarenotpresentedasalternativemeasuresto,andshouldbereadinconjunctionwith,PureTech’sconsolidatedfinancialinformationpreparedinaccordancewithIFRSandassetoutintheAnnualReport. ValueofPureTech's

holdings($millions)ingrowthstagebusinesses

asat:

GrowthStageBusiness 31December

2015(6)

31December

2014(5)

Dollarchange

year-over-year

Percentchange

year-over-year

VedantaBiosciences $83.0 $67.0 $16.0 23.9%Akili $45.9 $26.7 $19.2 71.9%Gelesis $56.8 $44.9 $11.9 26.5%Tal $30.6 $27.3 $3.3 12.1%Karuna $36.4 $24.9 $11.5 46.2%Follica $23.3 $18.2 $5.1 28.0%Entrega $15.7 $13.4 $2.3 17.2%AggregateHoldings $291.7 $222.4 $69.3 31.2%

Notes:(1) The Aggregate Holdings as at 31 December 2015 excludes cash, cash equivalents and short term investments held at thePureTechlevel.Asat31December2015,PureTechheldsuchamountstotalling$255.5million(thisamountincludestheamountsubsequently invested by PureTech in the first tranche of the Akili financing round in January 2016 of $11.5 million). TheAggregate Holdings includes ownership adjusted cash balances and short term investments amounting to $30.4million. Cashbalancesandshortterminvestmentsareasat31December2015,withtheexceptionofAkiliinwhichcasethecashbalanceisasimmediatelyfollowingthefirsttrancheoftheJanuary2016financinground.(2) Thevalueof thePureTech’s growth stagebusinessholdings represents theCompany’s interest in theequity valueofeachgrowthstagebusiness,calculatedasfollows:(BusinessEnterpriseValue−Debt+Cash)×PureTech’spercentageownershipplusthepresentvalueofPureTech’sexpectedfutureroyaltystreamassociatedwithaparticularbusiness,plusthevalueofdebtprovidedbyPureTechLLCtothatoperatingcompany,whenapplicable.(3)ThevaluesattributedtoroyaltystreamsincluderoyaltiesinrespecttoGelesis(2015:$14.6million,2014:$9.7million),Karuna(2015:$9.9million,2014:$7.5million),andFollica(2015:$8.7million,2014:$6.9million).ThevaluesattributedtodebtheldbyPureTech includedebtheldbyKaruna (2015:$2.9million,2014:$0.3million),Entrega (2015:$2.1million,2014:$0.3million),Follica(2015:$1.4million,2014:$0.1million),andVedanta(2015:$0.5million,2014:$0.4million).

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(4)Therelevantownershipinterestswerecalculatedonadilutedbasis,includingissuedandoutstandingsharesandoutstandingwarrants,writtencommitmentstoissueoptions,andoptionstopurchaseshares,butexcludingunallocatedsharesauthorisedtobe issued pursuant to equity incentive plans and any shares issuable upon conversion of outstanding convertible promissorynotes.AlthoughnotincludedintheAggregateHoldings,PureTechalsoholdsmajoritystakesinitsprojectphasebusinesses,whileconceptphaseinitiativesare,ineffect,whollyowned.(5)TheAggregateHoldingsasat31December2014hasbeencalculatedonthebasisofPureTech’spercentageownershipinterestasat31December2014orinthecaseofGelesisandTal,asatthedateoftheinitialclosingofthefinancingsroundsthatoccurredinthefirstquarterof2015.(6)TheAggregateHoldingsasat31December2015hasbeencalculatedonthebasisofPureTech’spercentageownershipinterestasat31December2015orinthecaseofAkili,asatthedateofthefirsttrancheofthefinancingroundthatoccurredinJanuary2016.TherecanbenoguaranteethattheaforementionedvaluationofPureTech’sgrowthstagebusinesseswillbeconsideredtobecorrectinlightofthefutureperformanceofourbusinesses,orthatPureTechwouldbe able to realise proceeds in the amount of such valuations, or at all, in the event of a sale or othermonetisationeventbyitofanyofitsgrowthstagebusinesses.At the closeof each annual financial period, theDirectors estimate and formally approve, the valueofPureTech’sgrowthstagebusinesseswhichisusedtoderivetheAggregateValueofGrowthStageBusinessHoldings (“Aggregate Holdings”). The Directors engage an external valuation expert in assisting theCompany in estimating the Aggregate Holdings. The Aggregate Holdings was $291.7 million as at 31December2015or,inthecaseofAkili,immediatelyaftertheclosingofthefirsttrancheofthefinancinground in January 2016 in which PureTech contributed $11.5 million of approximately $22.0 millioncommittedbyPureTech.TheAggregateHoldingsiscomprisedofPureTech’sownership-adjustedinterestsinitssevengrowthstagebusinesses.TheAggregateHoldingsdoesnotincludePureTech’sinterestsinitsfiveprojectphasebusinesses,inwhichPureTechholds,onaverage,approximately90percentonadilutedbasis,orPureTech’sinterestsinits10conceptphaseinitiatives,whicharewhollyownedbyPureTech.

Each growth stage business has an equity incentive plan in place which has the potential to dilutePureTech’sownership.Theequity incentiveplansare for thebenefitofemployees,directorsandotheradvisorsandserviceprovidersoftherelevantbusiness.TheCompany’sProspectusfiledinconjunctionwithitsinitialpublicofferingdisclosedtheinitialAggregateHoldings valuation of the growth stage businesses of $222.4 million as of 31 December 2014. ThisinformationwasprovidedintheProspectustoassistpotentialshareholdersandotherkeystakeholdersingaining a baseline understanding of the Company’s businessmodel and underlying portfolio of growthstagebusinesses.Infuturefilings,theCompanyexpectstodisclosethetotalAggregateHoldingsvalue,butnot the value of each growth stage business making up the total amount, as we believe that suchinformationcouldaffecttheCompany’sabilitytorealisethehighestpossiblevalueforthesebusinesses.TheCompany’sbusinessmodelreliesontheongoingdiscussionwiththird-partyinvestorsandpartnersinitsgrowthstagebusinesses.DisclosingtheindividualvaluationoftheCompany’sownershipstakeineachgrowthstagebusiness,aspartofcommunicatingourAggregateHoldings,providespotential third-partypartnersand investorsnegotiating leveragedueto theCompany’svoluntaryelection tocommunicateabalancedviewontheAggregateHoldingstoPureTech’sshareholders.Theviewpresentedinthevaluationof the Aggregate Holdings is usually not reflective of the highest possible value and is not the mostfavourable valuation that could ultimately be assigned by an investor or partner. In the interests ofpromotingtransparency,PureTechprovidesthefollowingnotesonourapproachtovaluation.TheAggregateHoldingshas increasedby$69.3million to$291.7millionor31.2percent. Excluding theimpact of the amounts investedby PureTechof $23.0million (inclusiveof the first trancheof theAkilifinancing round in January 2016 of $11.5million) subsequent to the 31December 2014 valuation, the

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valueoftheAggregateHoldingincreasedbyapproximately20.8percent.Approximately60percentofthevalue of the Aggregate Holdings at 31 December 2015 is supported by third-party investments andpartnerships.Thisincludesthird-partyfinancingsinthecaseofGelesis,TalandAkiliaswellasanexecutedpartnershipbetweenVedantaBiosciencesandJanssen.

ValuationmethodologyEach growth stage business is evaluated by the Company when requesting further investment fromPureTech based on a range of inputs, including, amongst others, business performance, market andcompetitoranalyses.TheAggregateHoldingsrepresentsthesumofthepartsofvaluationsbasedonrecentthirdpartyequityinvestments at the business level for Gelesis and Akili (2014 – Gelesis and Tal) and risk adjusted netpresent value from discounted cash flow valuations for Vedanta Biosciences, Entrega, Karuna, Tal, andFollica(2014–VedantaBiosciences,Entrega,Karuna,FollicaandAkili).Further details of themethodology applied by theDirectors in determining theValue ofGrowth StageBusinessHoldingsissetoutintheaccompanyingauditedfinancialstatements.PureTech’sprojectphasebusinessesandconceptphaseinitiativesThe Directors believe that PureTech has adopted a conservative approach in providing valuationdisclosure in respect of our growth stagebusinesses only. TheDirectors believe that theproject phasebusinesses and concept phase initiatives, established international advisory network and theme drivenbusinesscreationprocessprovidesignificantopportunitiestocreateandrealisesignificantfurthervaluefor PureTech’s shareholders.Inadditiontoitssevengrowthstagebusinesses,PureTechhasfiveprojectphasebusinesseswhichareatanearlierstageinPureTech’sprocessandwillformthebasisoffuturegrowthstagebusinesses.PureTech’s existing growth stage businesses have all emerged from PureTech’s established model.PureTech’splatform,infrastructureandinternationaladvisorynetworkenablesittoexplorenewthemesonanongoingbasis.PureTechcurrentlyhas10conceptphaseinitiativeswiththepotentialtobecomethefoundationforourfuturebusinesses.PureTech’semployeeshavebuiltupextensiveknowledgeinareasthatarecriticaltoitsbusinesssuchasopportunity analysis, design of key experiments, as well as filing and licensing intellectual property.PureTechalsoreliesonleadingserviceproviders,consultantsandvendorsincludingleadinglawfirmswithintellectual property expertise, regulatory consultants and contract research organisations whoseexpertisetheCompanycanemployinadisciplinedmannerwhileconductingkeyvalidatingexperiments.TheDirectors believe this combination of establishedworking relationships and broad expertise acrossthe team enables PureTech to manage its business with efficiency and reduced risk and ultimatelyprovides PureTechwith a reproduciblemodel to grow our business and generate further value for itsshareholders.

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PortfolioreviewSummary

Growthstagebusiness

Overview

VedantaBiosciences

Apreclinical stagecompanydevelopingamicrobiome immunesystemdrug discovery platform and drug candidates for the treatment ofimmune-mediateddiseases.

Gelesis A clinical stage company developing products that seek to induceweight loss and improve glycaemic control through an orallyadministeredcapsulethatexpandsintheGItractasitabsorbswater.

Akili A clinical stage company developing technology and products for thescreening, diagnosis and treatment of neurological disorders such asADHD,autismanddepressionthroughcomputersoftware.

Tal A clinical stage medical device company developing an innovative,noninvasive neurostimulation treatment for psychiatric disordersincludingdepressionandbipolardisorder.

Karuna Aclinicalstagecompanydevelopinganinnovativecombinationtherapyforthetreatmentofschizophrenia.

Entrega A preclinical stage company developing a drug platform for the oraladministration of proteins, peptides and other difficult-to-deliverpayloads,includingmagneticnanoparticles.

Follica Aclinical stagecompanydevelopingproducts togeneratenewhumanhairfolliclesandhair.

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Projectphasebusiness

Overview

TheSyncProject Developing a platform and products that seek to explore and leveragethe health potential of music by utilising a platform that takes inphysiological data from sensors and correlates that data with musicaldatacomponents(e.g.beatandrhythm).

SondeHealth Developingvoice-basedtoolsforthepassiveassessmentandtrackingofpatienthealth.

Commense Developing commensal organism-based products for the improvementofhumanhealthin,forexample,earlychildhood.

AlivioTherapeutics

VorBioPharma

Alivio Therapeutics is centred around a proprietary drug deliveryplatformfordrugsthattreatinflammationandunderlyingdisordersthatcauseinflammation.Vor BioPharma is a preclinical immuno-oncology business that isdevelopingnoveltargetedtherapiesforcancer.

GrowthStageBusinessesVedanta Biosciences is pioneering the development of a new class of therapies that are designed tomodulate pathways of interaction between the human microbiome and the host immune system.Vedanta Biosciences is a leader in the microbiome field focused on the discovery, development, andmanufacturing of drugs based on live commensalmicrobes. Using its proprietary technology platform,VedantaBioscienceshasisolatedavastcollectionofhuman-associatedbacterialstrainsandcharacterisedhow the immune system recognises and responds to these microbes. Vedanta Biosciences has out-licensedtherightstooneofitsproductcandidates,VE202,toJanssen,asubsidiaryofJohnson&Johnson,for anon-refundableupfrontpaymentanddevelopmentand commercialisationmilestonepaymentsofupto$339millionplustieredroyaltiesfromthehighsingledigitstothelowteens.Usingitsproprietarymicrobiome technology platform,Vedanta Biosciences has also generated a pipeline of additional drugcandidates which are being developed for infectious disease, immune tolerance, inflammation, andimmuno-oncology,includingonecandidateatasimilarstageofdevelopmentasVE202.VE202isexpectedtoenterclinicalstudies inthefirsthalfof2017 in IBD.VE303 isexpectedtoenterclinicalstudies inthefirsthalfof2017foraninfectiousdiseaseindication.Akili is a clinical stage business developing a new type of medicine that addresses a new target forcognition.Akili’stechnology,originallydiscoveredatUCSF,isbeingdeliveredinaconsumer-gradeactionvideo game interface and applied to diagnosing and treating cognitive disorders. Akili’s lead product isdesigned to monitor and improve the brain’s executive function, which is impacted in a number ofdisorders such as attention deficit hyperactivity disorder (ADHD), autism, Alzheimer’s disease andtraumaticbrain injury.Akili completedapilot clinical study inpaediatricADHD inpatients that showed

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statisticallysignificantimprovementsonmultipleoutcomesmeasuringattention,impulsivityandworkingmemory. To date, Akili has undertaken 10 clinical trials aswell as a number of smaller scale feasibilitytestingefforts.TheAlzheimer’spilotbiomarkerstudy fundedbyPfizercouldpotentially read-out in thesecondquarterof2016.AkiliexpectsitspivotalstudyinADHDtoread-outinthefirsthalfof2017,withapotentialproductlaunchinthesecondhalfof2017. Gelesis isaclinicalstagebusiness focusedonthedevelopmentofnovel therapiesto induceweight lossand improveglycaemic control inoverweightandobesepatients, including thosewithprediabetesanddiabetes.Gelesis100,oneof theGelesis’productcandidatesanda first-in-class therapeutic, is currentlybeingevaluatedinasix-monthpivotalstudy.GelesisisalsoadvancingGelesis200,createdfromthesameproprietary technology platformasGelesis100, as a product optimised to improve glycaemic control inprediabeticsandtype2diabeticswhomayormaynotrequireweightloss.Gelesisraised$49.5millioninfinancingandinitiatedaweightlosspivotaltrialforGelesis100followinganon-significantriskdesignationfromtheU.S.FoodandDrugAdministration(FDA),acceleratingitsclinicaltimelineforFDAsubmissionbyapproximatelyoneyear.Gelesis100’spivotalstudycouldpotentiallyread-outinthefirsthalfof2017,witha potential product launch in 2018. Gelesis200’s three-month efficacy proof-of-concept study couldpotentiallyread-outbytheendof2016.Tal Medical, a clinical stage neuroscience business developing a non-invasive, rapid-actingneuro-modulationtherapyfordepression,attracted$14.0millioninfinancing,enrolledthefirstsubjectsinadoseoptimisationstudyandreceivedpositiveconfirmationfromtheFDAthatthestudyqualifiesasanon-significant risk. Tal Medical’s ongoing 90-patient proof-of-concept study is funded by the NIMH’sRapidly Acting Treatments for Treatment Resistant Depression programme, which is designed to testpromising rapid-acting interventions. Tal Medical’s Major Depressive Disorder (MDD) proof-of-conceptstudyisexpectedtoread-outinthethirdquarterof2016,withitsdoseoptimisationstudyreadingoutinthefourthquarter.ThepotentiallaunchofTalMedical’sproductcandidateforMDDis2019.TalMedicalisintheprocessoffinalisingtheprotocolforapivotalstudyinbipolardisorder;thestudywillpotentiallystartinthefirsthalfof2017.Karuna is pursuing innovative therapies for the treatment of schizophrenia. Karuna’s lead programme,KarXT, is a product candidate consisting of xanomeline, a novel clinical-stage muscarinic acetylcholinereceptoragonist(activator)thathasdemonstratedefficacyinreducingpsychosisandimprovingcognitionin placebo-controlled human trials, and trospium chloride, an FDA-approved and well-establishedmuscarinic receptor antagonist (blocker) that studies have shown does not enter the central nervoussystem. If successful,KarXTcouldprovideanewmechanism for treating schizophrenia,a field inwhichfewsafeandeffectivenewmechanismshaveemergedoverthelasthalf-century.KarunahasreceivedtheWellcome Trust’s Translation Fund Award, consisting of an unsecured convertible note of up to $3.8million from the Wellcome Trust for its planned combination proof of concept study. Karuna’scombinationproof-of-concept studycouldpotentially read-outby theendof2016,which, if successful,couldbethebasisforinitiatingaPhase2studyin2017.Follicaisaclinicalstagebusinessutilisingitsregenerativebiologyplatformtechnologytodevelopanoveltreatmentforhairloss.Follica’stechnologyemploysatechniquedesignedtostimulatethegrowthofnewfollicles and hair through disruption of the skin, followed by treatment with drugs and chemicals toenhance the effect on these new hair follicles and potentially further develop new hair. Follica hascompleted three human clinical studies of patients with androgenetic alopecia to demonstrate hairgrowthandnewhairfollicleformationfollowingapplicationofitstechnology.Follicahasalsoperformedandfundedpreclinicalworkwhich,togetherwithresearchfromtheUniversityofPennsylvania,serveas

25

the foundational observations onwhich the technology is based. Follica plans to initiate a registrationstudy in the second half of 2016,with data read-out in 2017. If the data are favourable, FollicawouldpotentiallyplantoseekFDAclearancein2017,withcommercialreleasetofollowassoonas2018.Entregaisdevelopingaplatformtechnologyfortheoraldeliveryofbiologics,vaccinesandotherformsofmedicationthatareotherwisenotefficient inreachingthebloodstreamwhentakenorally.Tounderpinits technology, Entrega has generated proof of concept data demonstrating that Entrega’s system candelivertherapeuticpeptides,includinginsulin,intothebloodstreamofhealthyrats.Entregahasinitiateda series of large animal experiments designed to refine and validate this initial model. Entrega has apartnershipwithVerily,Google’s lifesciencesdivision, focusedondevelopingnanoparticle formulationsfororaldeliverywithEntrega’stechnology.Entregaexpectsaread-outofproof-of-conceptdeliverydatainlargeanimalsinthesecondhalfof2016.ProjectPhaseBusinessesPureTechcurrentlyhasfiveprojectphasebusinessesand10conceptphaseinitiativesoriginatingfromitstheme-driven process. In 2015, Alivio Therapeutics and Vor BioPharma advanced to the project phase.PeerInandKnodehavebeendeprioritisedbasedontheirlackofstrategicfitwithPureTech’scurrentfocusareas.Alivio Therapeutics is centred around a proprietary drug delivery platform for drugs that treatinflammation and underlying disorders that cause inflammation. There are dozens of diseases whereinflammation is a central part of the underlying disease pathology. Inflammatory diseases represent amulti-billion dollarmarket despite the fact that current treatmentsmay have limited efficacy and sideeffects. The approach thatAlivio is takingmay result in both improved safety and efficacy of currentlyusedagents.Theplatformmayalsoenablethedeliveryofagentsthatwouldotherwisenothaveclinicalutilityallowingfortheintroductionofnovelagentstotreatinflammatory-relatedconditions.BecauseoftheplatformnatureofAlivio’stechnology,ithasthepotentialtobeusedwithmultipleagents.Commense is developing novel microbiome derived therapeutics by priming, seeding and maintainingbeneficial microbes before birth, at birth, and beyond. Decades of research support the view thatmicrobial exposures early in life play amajor role in healthy development and are believed to be veryimportant for many conditions including diabetes, asthma, rheumatoid arthritis and Crohn’s disease.Recent work has begun to reveal the sources of these beneficial microbes, as well as strategies tooptimisetheirtransfer,colonisation,andpersistenceinthehost.Commensewasco-foundedbyateamofworld-classmicrobiomeresearchersthathavehelpedtopioneerthesediscoveriesinordertoturnthemintoproductswithbreakthroughpotentialtoimprovehealthinchildrenworldwide.SondeHealthSondeHealthisdevelopingaproprietaryvoice-basedtechnologyplatformwiththepotentialtotransformthewaywemonitoranddiagnosementalandphysicalhealth.Akeyunmetneedformedicineislow-orno-burdenmonitoring technologies that canprovide clinicallymeaningful information about a rangeofhealth and disease states on devices people already own and use every day. Although not widelyrecognised outside of specialised research communities, the human voice is a rich source of objectivehealth informationthatcanbeaccessedthroughsignalprocessingandcomputationalanalysis torevealhealth-relatedchangesinthefunctionofthemajorsystemsinvolvedinspeechproduction.Sayingasinglephrase requires complex coordination of multiple neural circuits in the brain, precise control of therespiratory system, and carefully timed and coordinated activation of the musculoskeletal system

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elementsthatcontrolarticulationalongtheentirevocaltract.Disease-specificdisruptionsinanyone(ormore) of these systems produce subtle, but characteristic changes in the non-linguistic features of thevoicethatareconsistentacrossindividualsandcanbeanalysedcomputationally.TheSyncProjectIn the growing digital medicine industry, Sync is positioned to become the first algorithmic musictherapeuticscompany.Sync’sgoalistocreatemusicaspersonalisedmedicinethroughtheapplicationofmachinelearningtoauniquedatasetcombiningmusiccharacteristicsandbiometricdata.Synchasbuiltanovel end-to-end versionof theplatform thatwill allow the company to gather this dataset a) quickerthan potential competitors and b) through an innovative model combining both an open consumercommunity(largepopulationstudies)andfocusedclinicalstudies.Synchasidentifiedinitialconditionsforhumanpilotstudies includingsleep,painandathleticperformanceandhasbegunclinicalstudies inthelatter.SyncisledbyCEOMarkoAhtisaari,formerChiefofDesignatNokia.VorBioPharmaVorBioPharmaisapreclinicalimmuno-oncologybusinessthatisdevelopingnoveltargetedtherapiesforcancer.Inrecentyears,targetedimmunotherapieshaveshownremarkableprogressintheclinic,yettheirapplicabilitybeyondasmall subsetofcancers iscurrently limited.Vor iscollaboratingwithsomeof theworld’s leading oncologists and immunologists to develop a breakthrough new technology platform toaddress thismajor challenge. Importantly,Vor’s focus is tobuild anapproach thathas thepotential toyield a pipeline of new therapies formalignancies that cannot be adequately addressed using existingapproaches.ConceptPhase InitiativesPureTechisalsopursuing10differentconceptphaseinitiativesinareaslikeinfectiousdisease,oncology,immunology and metabolism. Although these are earlier stage, these initiatives form the basis forPureTech’sfutureprojectphasebusinessesandroundoutPureTech’searly-stagepipeline.

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RiskManagementTheexecutionoftheGroup’sstrategyissubjecttoanumberofrisksanduncertainties.Asadeveloperofearly stage technologies attempting to address significant unmetmedical needs, the Group inherentlyoperates in a high-risk environment. The overall aim of the Group’s risk management effort is to achievean effective balancing of risk and reward, although ultimately no strategy can provide an absoluteassuranceagainstloss.Risks are formally identified by the Board and appropriate processes are put in place to monitor andmitigatethem. Ifmorethanoneeventoccurs, it ispossiblethattheoveralleffectofsucheventswouldcompoundthepossibleeffectontheGroup.Theprincipal risks that theBoardhas identifiedas thekeybusinessrisksfacingtheGrouparesetoutinthetablebelowalongwiththeconsequencesandmitigationof each risk. Any number of these could have a material adverse effect on the Group, its financialcondition,itsdevelopment,resultsofoperations,businessesand/orfutureprospects.

1. The scienceand technologybeingdevelopedor commercialisedby theGroup’sbusinessesmayfail and/or the Group’s businessesmay not be able to develop their intellectual property intocommercially-viableproductsor technologies. There is alsoa risk that certainof thebusinessesmayfailornotsucceedasanticipated,resultinginsignificantdeclineoftheGroup’svalue.

Impact:ThefailureofanyoftheGroup’sbusinesseswoulddecreasetheGroup’svalue.AfailureofoneofthemajorbusinessescouldalsoimpactontheperceptionoftheGroupasadeveloperofhighvaluetechnologiesandpossiblymakeadditionalfundraisingattheGrouporbusinesslevelmoredifficult.Mitigation: Beforemaking any decision to develop any technology, extensive due diligence iscarried out by the Group which covers all the major business risks including technologicalfeasibility,marketsize,strategy,adoptionandintellectualproperty.Acapitaldisciplinedapproachispursuedsuchthatsomelevelofproof-of-concepthastobeachievedbeforesubstantialcapitaliscommittedandthereafterallocated.Capitalistranchedsoastofundprogrammesonlytotheirnext value milestone. Members of the Group’s Board serve on the board of directors of eachbusinesssoastomaintaincontrolovereachbusiness’strategyandtooverseeproperexecutionthereof. The Group uses its extensive network of advisers to ensure that each business hasappropriatedomainexpertiseasitdevelopsandexecutesonitsstrategy.

2. Clinical trials and other tests to assess the commercial viability of the product are typicallyexpensive, complex and time consuming, and have uncertain outcomes. Conditions in whichclinicaltrialsareconducteddiffer,andresultsachievedinonesetofconditionscouldbedifferentfrom the results achieved in different conditions or with different subject populations. If theGroup’sproductcandidates fail toachievesuccessfuloutcomes in their respectiveclinical trials,theproductswillnotreceiveregulatoryapprovalandinsucheventcannotbecommercialised.Inaddition,iftheGroupfailstocompleteorexperiencesdelaysincompletingclinicaltestsforanyofits product candidates, it may not be able to obtain regulatory approval or commercialise itsproductcandidatesonatimelybasis,oratall.

Impact:A critical failure of a clinical trial may result in termination of the programme and asignificant decrease in the Group’s value. Significant delays in a clinical trial to support the

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appropriateregulatoryapprovalscouldsignificantlyimpacttheamountofcapitalrequiredforthebusinesstobecomefullysustainableonacashflowbasis.Mitigation: The Group has dedicated internal resources to establish andmonitor each of theclinical programmes in order to try and maximise successful outcomes. Significant scientific duediligence and preclinical experiments are done prior to a clinical trial to attempt to assess theoddsofthesuccessofthetrial.Intheeventoftheoutsourcingofthesetrials,careandattentionisgiventoassurethequalityofthevendorsusedtoperformthework.

3. Thepharmaceuticalindustryishighlyregulated.Regulatoryauthoritiesacrosstheworldenforcearange of laws and regulationswhich govern the testing, approval,manufacturing, labelling andmarketing of pharmaceutical products. Stringent standards are imposed which relate to thequality, safety and efficacy of these products. These requirements are amajor determinant ofwhetheritiscommerciallyfeasibletodevelopadrugsubstanceormedicaldevicegiventhetime,expertise, and expensewhichmust be invested.Moreover, approval in one territory offers noguarantee that regulatory approvalwill be obtained in any other territory. TheGroupmay notobtainregulatoryapprovalforitsproducts.Evenifproductsareapproved,subsequentregulatorydifficulties may arise, or the conditions relating to the approval may be more onerous orrestrictivethantheGroupexpects.

Impact:The failure of one of the Group’s products to obtain any required regulatory approvalmayresultinasignificantdecreaseintheGroup’svalue.Mitigation: The Group manages its regulatory risk by employing highly-experienced clinicalmanagers and regulatory affairs professionals who, where appropriate, will commission advicefromexternaladvisersandconsultwith the regulatoryauthoritieson thedesignof theGroup’spreclinical and clinical programmes. Theseexperts ensure thathighqualityprotocols andotherdocumentation are submitted during the regulatory process, and that well-reputed contractresearchorganisationswithglobalcapabilitiesareretainedtomanagethetrials.

4. There is a risk of adverse reactions with all drugs and medical devices. If any of the Group’sproducts are found to cause adverse reactions or unacceptable side effects, then productdevelopmentmaybedelayed,additionalexpensesmaybeincurrediffurtherstudiesarerequired,and, in extreme circumstances, itmay prove necessary to suspend or terminate development.Thismayoccurevenafterregulatoryapprovalhasbeenobtained, inwhichcaseadditionaltrialsmayberequiredortheapprovalmaybesuspendedorwithdrawnoradditionalsafetywarningsmay have to be included on the label. Adverse events or unforeseen side effects may alsopotentially lead to product liability claims being raised against the Group as the developer of theproductsandsponsoroftherelevantclinicaltrials.

Impact:Unacceptable adverse reactions or side effectsmay result in a smallermarket for theGroup’sproducts,orevencausetheproductstofailtomeetregulatoryrequirementsnecessaryforsaleoftheproduct.This,aswellasanyclaimsfor injuryorharmresultingfromtheGroup’sproducts,mayresultinasignificantdecreaseintheGroup’svalue.Mitigation: TheGroupdesigns itsproductswithsafetyasa toppriorityandconductsextensivepreclinical and clinical trialswhich test for and identify anyadverse sideeffects. Insurance is inplacetocoverproductliabilityclaimswhichmayariseduringtheconductofclinicaltrials.

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5. The Group may not be able to sell its products profitably if reimbursement from third-party

payers such as private health insurers and government health authorities is restricted or notavailablebecauseforexampleitprovesdifficulttobuildastrongenougheconomiccasebasedonthe burden of illness and population impact. Third-party payers are increasingly attempting tocurtail healthcare costs by challenging the prices that are charged for pharmaceutical productsanddenyingorlimitingcoverageandthelevelofreimbursement.Moreover,eveniftheproductscan be sold profitably, they may not be accepted by patients and the medical community.Alternatively, theGroup’scompetitors–manyofwhomhaveconsiderablygreater financialandhuman resources –maydevelop safer ormore effective products or be able to competemoreeffectively in themarkets targeted by the Company.New companiesmay enter thesemarketsand novel products and technologies may become available which are more commerciallysuccessfulthanthosebeingdevelopedbytheCompany.

Impact:The failure of the Group to obtain reimbursement from third-party payers, as well ascompetition fromotherproducts,may significantlydecrease theamountof revenue theGroupmayreceivefromproductsales.ThismayresultinasignificantdecreaseintheGroup’svalue.Mitigation: TheGroup engages reimbursement experts to conduct pricing and reimbursementstudiesforitsproductstoensurethataviablepathtoreimbursement,ordirectuserpayment,isavailable.TheGroupalso closelymonitors the competitive landscape forallof itsproductsandadaptsitsbusinessplansaccordingly.

6. TheGroupmaynotbeabletoobtainpatentprotectionforitsproductsormaintainthesecrecyofitstradesecretsandknow-how.IftheGroupisunsuccessful indoingso,othersmaymarkettheproducts at significantly lowerprices.Alternatively, theGroupmaybe sued for infringementofthird-party patent rights. If these actions are successful then the Group would have to paysubstantialdamagesandpotentiallyremoveitsproductsfromthemarket.TheCompanylicencescertain intellectual property rights from third parties. If the Company fails to comply with itsobligationsunder theseagreements itmayenable theotherparty to terminate theagreement.This could impair the Company’s freedom to operate and potentially lead to third partiespreventingitfromsellingcertainofitsproducts.

Impact:The failure of the Group to obtain patent protection andmaintain the secrecy of keyinformation may significantly decrease the amount of revenue the Group may receive fromproduct sales. Any infringement litigation against the Group may result in the payment ofsubstantialdamagesbytheGroupandresultinasignificantdecreaseintheGroup’svalue.Mitigation: The Group spends significant resources using top tier advisers in the prosecution of itspatent applications. Third-party patent filings aremonitored to ensure the Group continues tohave freedom to operate. Confidential information (both of the Group and belonging to thirdparties) is protected through use of confidential disclosure agreements with third parties, andsuitable provisions relating to confidentiality and intellectual property exist in the Company’semploymentandadvisorycontracts.Licencesaremonitoredforcompliancewiththeirterms.

7. The Group expects to continue to incur substantial expenditure in further research anddevelopment activities of its businesses. There is no guarantee that the Group will becomeprofitableand,evenifitdoesso,itmaybeunabletosustainprofitability.

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Impact:Thestrategicaimof thebusiness is togenerateprofits for itsshareholders throughthecommercialisation of technologies through product sales, strategic partnerships and sales ofbusinesses.Thetimingandsizeofthesepotentialinflowsisuncertainandshouldrevenuesfromouractivitiesnotbeachieved,orintheeventthattheyareachievedbutatvaluessignificantlylessthan the amount of capital invested, then it would be difficult to sustain the Group’s business.Mitigation: TheGroupretainssignificantcash inordertosupportfundingof itsbusinesses.TheGrouphasclose relationshipswithawidegroupof investorsandstrategicpartners toensure itcancontinuetoaccessthecapitalmarketsandadditionalfundingforitsbusinesses.

8. TheGroup operates in complex and specialised business domains and requires highly qualifiedandexperiencedmanagementtoimplementitsstrategysuccessfully.TheGroupandmanyofitsbusinesses are located in theUnited Stateswhich is a highly competitive employmentmarket.Moreover, the rapid development which is envisaged by the Group may place unsupportabledemands on the Group’s current managers and employees, particularly if it cannot attractsufficientnewemployees.ThereisalsoriskthattheGroupmaylosekeypersonnelattheGrouporitsbusinesses.

Impact:ThefailuretoattracthighlyeffectivepersonnelorthelossofkeypersonnelwouldhaveanadverseimpactontheabilityoftheGrouptocontinuetogrowandmaynegativelyaffecttheGroup’scompetitiveadvantage.Mitigation: The Board annually seeks external expertise to assess the competitiveness of thecompensationpackagesof its seniormanagement.SeniormanagementcontinuallymonitorandassesscompensationlevelstoensuretheGroupremainscompetitiveintheemploymentmarket.TheGroupmaintains anextensive recruitingnetwork through its Boardmembers, advisers andscientific community involvement. TheGroupalsoemploys anexecutive as a full-time in-houserecruiter.

ThisStrategicReportwasapprovedbytheBoardofDirectors.ByorderoftheBoard

StephenMunizCompanySecretary

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ResponsibilitystatementoftheDirectorsinrespectoftheAnnualFinancialReportThe responsibility statementsetoutbelowhasbeen reproduced fromtheAnnualReportandAccountsandrelatestothatdocumentandnotthisannouncement.

Weconfirmthattothebestofourknowledge:

• thefinancialstatements,preparedinaccordancewiththeapplicablesetofaccountingstandards,giveatrueandfairviewoftheassets, liabilities, financialpositionandlossoftheCompanyandtheundertakingsincludedintheconsolidationtakenasawhole;and

• the Strategy Report and Directors’ Report includes a fair review of the development andperformanceofthebusinessandthepositionoftheissuerandtheundertakingsincludedintheconsolidationtakenasawhole,togetherwithadescriptionoftheprincipalrisksanduncertaintiesthattheyface.

WeconsidertheAnnualReportandaccounts,takenasawhole,isfair,balancedandunderstandableandprovides the information necessary for shareholders to assess the Group’s position and performance,businessmodelandstrategy.By order of the BoardStephenMunizCompanySecretary

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Financialreview

CashRaisedin2015

2015$millions

ProceedsfromInitialPublicOffering $183.4ProceedsfromPrivateEquityFinancings 52.2TotalCashRaisedbyPureTechin2015 $235.6ProceedsfromOutsideInvestorsfromFinancingsofGrowthStageBusinesses $50.3ProceedsfromReceiptofMilestonePayments 10.0TotalCashRaisedforGroupin2015 $295.9The financial results for year reflect a transformational period for the Group. During 2015, the Groupsignificantly strengthened its financial position, liquidity and ability to fund its pipeline by raisingmorethan $295million, including proceeds of $196million from the Company’s listing on the London StockExchange (“Initial Public Offering” or “IPO”) which contributed $183.4 million net of expenses.The Group also completed a private equity financing in early 2015 resulting in net proceeds of $52.2million, realised $50.3 million of proceeds from outside investors in subsidiary equity financings andissuance of convertible notes, as well as $10.0 million in a non-refundable payment from Janssen, asubsidiaryofJohnson&Johnson.ThecashreservesgeneratedbytheseCompanyfundraisings,proceedsfromoutside investors and receipt of themilestone paymentwill be used to fund infrastructure costs,pipeline development and progress the existinggrowth stagebusinesses towardmeaningfulmilestoneevents.During 2015, PureTech has scaled up its functions and continued to source new technologies andplatforms. The growth stage businesses have expanded their research and development activities andfocused on building out their teams. As of 31 December 2015, the Group had $255.5 million of cashreserves at the PureTech level to fund activities of the Group, including pipeline development andparticipatinginfinancingsofthebusinesses.Inaddition,theGrouphassuccessfullyfinanceditsgrowthstagebusinessesbydeployingsomeofitscashreserves,while attractingmeaningful outside investment. This has resulted in increased funding at thegrowth stage businesses totalling, $69.8million, with $19.5million coming from the Group and $50.3millionprovidedfromoutsideinterests.

ResultsofOperations

2015$millions

2014$millions

Revenue $11.8 $2.2 OperatingCosts(4)(5) (43.6) (1) (16.6) (1)OtherIncome 0.5 — NetFinanceCosts (2.1) (2) (2.4) (2)AdjustedLossbeforeIncomeTaxes

(33.4) (3) (16.8) (3)

ProvisionforIncomeTaxes (1.9) 0.3 AdjustedLoss $(35.3) (3) $(16.5) (3)

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(1)Statedbeforetheeffectofshare-basedpaymentof$11.3million(2014–$2.8million),depreciationof$0.4million(2014–$0.2million)andamortisationof$0.3million(2014–$0.2million).

(2) Stated before the effect of the IAS 39 fair value accounting charge of $7.5 million (2014 – $56.4million)andfinancecost–subsidiarypreferredsharesof$3.5millionin2015.

(3)Statedbeforethechargesdiscussedinfootnotes1and2,above.(4)For2015,operatingcostsforourreportablesegmentsandParentCompanyandotherstatedpriorto

share-basedcompensation,depreciationandamortisationwere$27.9million,$2.3millionand$13.4million for growth stage businesses, project phase businesses and Parent Company and other,respectively.

(5) Parent Company and other operating costs before share-based compensation, depreciation andamortisationandthecostofprofessionalservicestotalling$5.5millionassociatedwithourIPO,whichisnon-recurringinnature,was$7.9millionfor2015.

Revenue

The Group’s operations do not yet generate continuing product revenues. Some of the growth stagebusinesses currently generate revenue from collaborations with third parties. Future revenue fromgrowthstagebusinessesareexpectedtobeearnedunderlicenceandcollaborationagreementsandmayinclude non-refundable licence fees. In addition, Gelesis has received government grants for certaincapital expenditures and expenses incurred for research and development work performed underspecifiedprogrammesinItalyandtheEuropeanUnion.Consolidatedrevenueincreasedby$9.6millionto$11.8million in2015.This isprimarilyattributabletorevenue at growth stage businesses increasing almost entirely as a result of a $10.0 million non-refundablemilestonepaymentVedantaBiosciencesreceivedaspartofitscollaborationwithJanssen,todevelopandcommercialiseVE202,amicrobiomeproductcandidatewithaninitialfocusoninflammatoryboweldisease.

Operatingcosts

Operating costs are comprised of personnel costs, consulting, professional and legal fees and businessdevelopment,aswellasresearchanddevelopmentexpensesmainly intheformofpreclinicalactivities,clinical studies, intellectual property registration, licensing technologies and the cost of acquiring,developing and manufacturing clinical study materials. Personnel and consultation costs are primarilyrelated to the remunerationof staff, directors and advisers in the formof salaries, bonuses, taxes andadviserfees.Groupoperatingcostsbeforetheimpactofshare-basedpaymentcharges,depreciationandamortisationof intangibles increased by $27.0 million. Included in operating costs in 2015 are $7.9 million ofprofessional services associated with the equity raise transactions. This includes costs related toPureTech’s IPO, which were not otherwise offset against the net proceeds of the offering and otherrelatedcosts.Substantiallyallofthesecostsarenotexpectedtoberecurringinnature.TheGroup’soperatingcostsalsoreflected increasesduetosignificantlyhigherexternalcosts relatedtoresearch and development expenses at the growth stage business units, added headcount and higheraveragecompensationlevelsrelativeto2014andanexpandingfootprintrequiringadditionalspaceandlease costs and thehigher costprofile associatedwithbeinganewlypublic company.ParentCompanyoperating costs before share-based compensation, depreciation and amortisation and the cost ofprofessionalservicesassociatedwiththeIPOwas$7.9millionfor2015.

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TheDirectorsanticipatethatoperatingcostswillincreaseastheGroupcontinuestoadvancethepipeline,sourcenewtechnologiesandprogresstheexistingdevelopmentprogrammes.

Netfinancecosts

Net finance costs, before consideration of the charge related to finance costs – IAS 39 fair valueaccountingof$7.5million($56.4million–2014)andfinancecosts–subsidiarypreferredsharesof$3.5millionin2015,decreasedby$0.3million,primarilydrivenbytheconversionofnotespayableintoequityholdings for certain growth stage businesses during 2015, as well as the favourable effect of interestincomewas a greater offset in 2015 driven by higher balances in short term investments and amorefavourableinterestrateenvironment.TheGroup’sIAS39fairvalueaccountingchargerelatestoderivativeliabilitiesassociatedwithsubsidiarypreferred stock conversion rights, convertiblenotesandwarrants. This change isdrivenby increases intheequity valueof theunderlyingbusinesses.When theGroup realisesan increase in thevalueof thebusinesses that we consolidate, a charge will be recognised. The charge related to IAS 39 fair valueaccountingdecreasedby$48.9millionto$7.5millionin2015.Theyear-over-yeardecreaseisattributableto the automatic conversion options embedded in Gelesis’ preferred stock which accounted for $50.7millionofthenetfinancecostin2014.ThesignificantincreaserelatedtoGelesis’preferredstockin2014was attributable to the significant increase in the equity value of Gelesis. The charge in 2015 of $7.5millionwasdrivenbythe increase inthevalueofconversionrightsembedded inthepreferredstockofseveralgrowthstagebusinesses.

FinancialPosition

2015$millions

2014$millions

AssetsTotalnon-currentassets $8.6 $4.3Totalcurrentassets(1)(2) 318.2 66.7Totalassets 326.8 71.0Non-currentliabilities 2.2 0.7Totalcurrentliabilities 160.5 93.7Totalliabilities $162.7 $94.4(1)Includesconsolidatedcash,cashequivalentsandshortterminvestmentstotalling$313.7million(2014–$62.7million).(2) PureTech had cash, cash equivalents and short term investments totalling $255.5 million at 31December,2015.ThefinancialpositionofGroupwassignificantlystrengthened in2015.Cash,cashequivalentsandshortterm investments increased by $251.0 million. The Group completed a private equity financing in early2015 resulting in net proceeds of $52.2million, its IPO in June 2015 resulted in $183.4million in netproceeds, $50.3 million of proceeds was realised from outside investors, and $10.0 million in anon-refundablemilestonepaymentwasreceivedfromtheJanssencollaborationagreement.Asaresult,PureTechhascashandcashequivalentsofapproximately$255.5millionasof31December2015.

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Asnotedabove,theGroupsignificantlyincreasedspendingonitsoperationsduring2015.Inaddition,theDirectorsanticipatethattheCompany’spre-2015fundsandtheproceedsofthefinancingsin2015willbeused to continue to fund infrastructure costs, pipeline development and progress the existing growthstagebusinessunitstowardmeaningfulmilestoneevents.

OthersignificantitemsimpactingtheGroup’sfinancialpositioninclude:

• Propertyandequipmentincreasedby$3.5millionduetoleaseholdimprovementsrelatedtothenewmainofficeslocatedinBoston,Massachusetts,aswellasacquisitionofequipmentbycertaingrowthstagebusinessesastheyexpandtheirresearchanddevelopmentactivities.

• Intangible assets increased $1.2 million primarily as a result of the acquisition of intellectualpropertybyGelesis.

• Currentliabilitiesincreasedsignificantlyin2015primarilyasaresultofequityfinancingsinvolvingtheissuanceofpreferredsharesbyTalMedicalandGelesistooutsideinvestorsfor$48.5millionin fundingand the increase inderivative liability associatedwith thenewequity financingsandpreviouslyexistingderivatives.

CashFlows

2015$millions

2014$millions

Netcashoutflowfromoperatingactivities $(28.6) $(10.5)Netcashinflow/(outflow)frominvestingactivities $(184.2) $0.7Netcashinflowfromfinancingactivities(1) $285.9 $64.7(1)JanssenBiotechnon-refundablemilestonepaymentincludedinoperatingactivities.Asnotedabove,theequityfinancingsundertakenbytheGroupandotheractivitiesduringtheyearhaveresulted in significant cash inflows.TheCompany’spre-2015cash, togetherwith thecash raisedduring2015,will beused to fund infrastructure costs, pipelinedevelopment andprogress theexistinggrowthstagebusinessunitstowardmeaningfulmilestoneevents.Cashthatcannotbe immediatelydeployedintheseeffortshasbeenusedtopurchaseshortterminvestments(e.g.U.S.Treasuries),asdescribedbelow.As of 31December 2015, theGroup has $255.5million of cash reserves at the PureTech level to fundactivitiesoftheGroup,includingpipelinedevelopmentandparticipatinginfinancingsofthebusinesses.TheGroup’snetoperatingcashoutflowfundedthepaymentofoperatingexpenseswhicharelargelycashbased.Cash inflowswereprimarilydrivenbythereceiptofa$10millionnon-refundablepaymentfromJanssen.Thenetcashinflowfromfinancingactivitiesduring2015wasfromaprivateequityfinancinginearly2015resultinginnetproceedsof$52.2million,itsIPOinJune2015resultingin$183.4millioninnetproceeds,andapproximately$50millionofproceeds fromoutside investors in subsidiary financings. These fundswereused,inpart,tofund$179.6millionofnetpurchasesofshortterminvestments(e.g.U.S.Treasuries)and $4.7 million of purchases of property and equipment and intangible assets.TheGroupisfocusedonmaintainingliquidityaswellascapitalpreservationofshortterminvestment.Asa result, surpluscashreserveshavebeen invested inhighly-rated,shortduration investments,primarily

36

U.S.Treasuriesunderoneyear.TheGroupmonitorsmarketconditions tomanageany risk to theshortterminvestmentportfolioand investigatesopportunitiesto increasetheyieldontheamounts invested,whilemaintainingPureTech’sliquidityandcapitalpreservation.At31December2015,theGrouphad$0.4million of cash reserves held in Euros at a foreign bank. These cash reserves are used to fund theoperation of Gelesis’ Italian manufacturing and R&D subsidiary. The Directors believe it is prudent to havethese cash reserves denominated in Euro to fund operations and maintain some diversification ofcurrencyexchangerisk.

37

FinancialStatementsConsolidatedStatementsofComprehensiveLossFortheyearsendedDecember31: Note 2015 2014 $’000 $’000 Revenue 3 11,828 2,222Operatingexpenses: Generalandadministrativeexpenses 5 (36,471) (14,397)Researchanddevelopmentexpenses 5 (18,999) (5,270)Operatingloss (43,642) (17,445)Otherincome 448 —Financecosts: Financeincome 7 262 189Financecosts–subsidiarypreferredshares 7 (3,515) —Financecosts–contractual 7 (2,364) (2,594)Financecosts–IAS39fairvalueaccounting 7 (7,509) (56,371)Netfinancecosts (13,126) (58,776)Lossbeforetaxes (56,320) (76,221)LossbeforetaxespreIAS39fairvalueaccounting,financecost– subsidiarypreferredshares,Sharebasedpaymentexpense, depreciationoftangibleassetsandamortisationofintangibleassets (33,461) (16,647)Financecosts–IAS39fairvalueaccounting 7 (7,509) (56,371)Financecosts–subsidiarypreferredshares 7 (3,515) —Share-basedpaymentexpense 6 (11,095) (2,811)Depreciationoftangibleassets 9 (452) (176)Amortisationofintangibleassets 10 (288) (216)Lossbeforetaxes (56,320) (76,221)Taxation 24 (1,924) 278Lossfortheyear (58,244) (75,943) Othercomprehensive(loss)/income: Itemsthatareormaybereclassifiedasprofitorloss Foreigncurrencytranslationdifferences (262) 58Unrealisedgain/(loss)onavailableforsaleinvestments 24 —Totalothercomprehensive(loss)/income (238) 58Totalcomprehensivelossfortheyear (58,482) (75,885)Lossattributableto: OwnersoftheCompany (39,393) (41,643)Non-controllinginterests 15 (18,851) (34,300) (58,244) (75,943)Comprehensivelossattributableto: OwnersoftheCompany (39,631) (41,585)Non-controllinginterests 15 (18,851) (34,300) (58,482) (75,885)Losspershare Basic(loss)pershare 8 $(0.21) $(0.51)Diluted(loss)pershare 8 $(0.21) $(0.51)

38

ConsolidatedStatementsofFinancialPosition

Fortheyearsended31December: Note 2015 2014 $’000 $’000Assets Non-currentassets Propertyandequipment,net 9 4,519 1,227Availableforsaleinvestments 106 78Intangibleassets,net 10 3,871 2,999Othernon-currentassets 57 5Totalnon-currentassets 8,553 4,309Currentassets Tradeandotherreceivables 12 706 1,750Prepaidexpensesandothercurrentassets 2,964 1,836Otherfinancialassets 11 826 472Shortterminvestments 20 178,955 701Cashandcashequivalents 11 134,751 61,960Totalcurrentassets 318,202 66,719Totalassets 326,755 71,028Equityandliabilities Equity Sharecapital 4,523 2,362Mergerreserve 138,506 86,755Sharepremium 181,744 —Translationreserve (93) 169Otherreserve 12,863 3,139Accumulateddeficit (111,420) (70,421)Parentequity 13 226,123 22,004Non-controllinginterests 15 (62,070) (45,317)Totalequity 164,053 (23,313)Non-currentliabilities Deferredrevenue 3 291 561Otherlongtermliabilities 1,887 107Totalnon-currentliabilities 2,178 668Currentliabilities Deferredrevenue 3 2,458 3,293Tradeandotherpayables 18 7,223 4,731Subsidiary: Notespayable 16 4,955 6,948Derivativeliability 20 65,501 52,794Warrantliability 17,20 14,263 14,125Preferredshares 14 65,502 11,494Othercurrentliabilities 622 288Totalcurrentliabilities 160,524 93,673

39

Consolidated Statement of Changes in EquityFortheyearsended31December:

ShareCapital

Note Shares Amount

Share

premiumMergerreserve

Translationreserve

Otherreserve

Accumulateddeficit

TotalParentequity

Non-controlling

interests(see

Note15)Total

equity $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Balanceat1January2014 63,658,930 1,273 — 31,238 111 1,558 (35,064) (884) (7,143) (8,027)Netloss — — — — — — (41,643) (41,643) (34,300) (75,943)Foreigncurrencyexchange — — — — 58 — — 58 — 58Totalcomprehensivelossfortheperiod — —

— — 58 — (41,643) (41,585) (34,300) (75,885)

Issuanceofshares(netofissuancecostsof$414,000) 13 37,402,400 748

— 55,093 — — — 55,841 — 55,841

Conversionofconvertiblenotes 13,14 331,560 7 — 493 — — 390 890 — 890Issuanceofsharesforservices 13 175,730 4 — 261 — — — 265 — 265Conversionofpartnershipandprofitsinterests 13,14 16,065,690 321

— (321) — — — — — —

Issuanceofsharesasequityincentives 13 464,657 9

— (9) — — — — — —

Newfundsintonon-controllinginterests 15 — —

— — — — — — 1,031 1,031

GainarisingfromchangeinNCI 15 — — — — — — 5,992 5,992 (5,992) —Amountre-classifiedtorealisedgainincludedinearnings 13 — — — — — (143) — (143) — (143)Dividends 13 — — — — — — (96) (96) — (96)Equity-settledshare-basedpayments 6 — —

— — — 1,724 — 1,724 1,087 2,811

Balance31December2014 118,098,967 2,362 — 86,755 169 3,139 (70,421) 22,004 (45,317) (23,313)Netloss — — — — — — (39,393) (39,393) (18,851) (58,244)Foreigncurrencyexchange — — — — (262) — — (262) — (262)Unrealisedgain — — — — — 24 — 24 — 24Totalcomprehensivelossfortheperiod — —

— — (262) 24 (39,393) (39,631) (18,851) (58,482)

Issuanceofshares 13 24,006,500 480 — 51,751 — — — 52,231 — 52,231

Totalliabilities 162,702 94,341Totalequityandliabilities 326,755 71,028

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IssuanceofIPOshares(netofissuancecostsof$11.8m) 13 67,599,621 1,352

157,923 — — — — 159,275 — 159,275

IssuanceofOverallotmentshares(netofissuancecostsof$772,000) 13 10,139,943 202

23,948 — — — — 24,150 — 24,150Newfundsintonon-controllinginterests 15 — — — — — — — — — —Gain/(loss)arisingfromchangeinNCI 15 — — — — — — (1,727) (1,727) 694 (1,033)Issuanceofsharesasequityincentives 6,328,720 127 (127) — — — — — — —Conversionofconvertiblenotes — — — — — 88 88 — 88Subsidiarydistributiontomembers — — — — — 9 33 42 — 42Equity-settledshare-basedpayments 6 — —

— — — 9,691 — 9,691 1,404 11,095

Balance31December2015 226,173,751 4,523 181,744 138,506 (93) 12,863 (111,420) 226,123 (62,070) 164,053

ConsolidatedStatementsofCashFlows

Fortheyearended31December: Note 2015 2014 $’000 $’000Cashflowsfromoperatingactivities: Lossfortheyear (58,244) (75,943)Adjustmentstoreconcilenetoperatinglosstonetcashusedinoperatingactivities:

Non-cashitems: Depreciationandamortisation 9,10 740 455Equity-settledshare-basedpaymentexpense 6 11,095 2,811Subsidiaryresearchanddevelopmenttaxcredit (395) —Non-cashrentexpense 248 —Unrealised(loss)/gainonforeigncurrencytransactions 12 233Issuanceofsharesforservices — 265Financecosts 7 13,126 58,776Otheradjustments — (10)Changesinoperatingassetsandliabilities: Accountsreceivable,net 12 1,112 794Otherfinancialassets (354) (349)Prepaidexpensesandothercurrentassets (780) (636)Deferredrevenues 3 (1,104) 1,083Otherlongtermliabilities 1,164 (393)Accountspayableandaccruedexpenses 18 4,319 2,371

41

Netcashusedinoperatingactivities (28,611) (10,543)Cashflowsfrominvestingactivities: Purchaseofpropertyandequipment 9 (3,455) (367)Purchasesofintangibleassets 10 (1,155) (53)Proceedsfromsaleofavailableforsaleinvestments — 186Purchasesofshortterminvestments (385,383) (2,219)Proceedsfrommaturityofshortterminvestments 205,752 3,200Netcashprovided(usedin)/byinvestingactivities (184,241) 747Cashflowsfromfinancingactivities: Proceedsfromissuanceofconvertiblenotes 16 1,845 7,615Proceedsfromsubsidiarynotespayable 16 — 1,461Repaymentsoflongtermdebt 16 (366) (20)Proceedsfromtheissuanceofshares,netofissuancecosts 13 52,231 55,841Proceedsfrominitialpublicoffering,netofissuancecosts 159,275 —Proceedsforoverallotmentshares 24,150 —Proceedsfromissuanceofsharecapitalandwarrantsinsubsidiaries 48,760 —Otherfinancingactivities 42 (174)Netcashprovidedbyfinancingactivities 285,937 64,723Effectofexchangeratesoncashandcashequivalents (294) (138)Netincreaseincashandcashequivalents 72,791 54,789Cashandcashequivalentsatbeginningofyear 61,960 7,171Cashandcashequivalentsatendofyear 134,751 61,960Supplementaldisclosureofnon-cashinvestmentandfinancingactivities: Conversionofsubsidiarynotespayableandaccruedinterestintopreferredstock

5,936

5,523

Gain/(Loss)onNCI (2,098) 3,8081.AccountingpoliciesBasisofpreparation Thefinancialinformationsetwithinthisdocumentdoesnotconstitutethecompany'sstatutoryaccountsfortheyearsended31December2015or2014butisderivedfromthoseaccounts.Statutoryaccountsfor2015will be delivered to the registrar of companies in due course. The auditor has reported on thoseaccounts; their reportwere (i) unqualified, (ii) didnot includea reference to anymatters towhich theauditor drew attention by way of emphasis without qualifying their report and (iii) did not contain astatementundersection498(2)or(3)oftheCompaniesAct2006. PureTech is comprised of PureTech Health plc (the “Parent” or the “Company”) and its subsidiaries(together,the“Group”).TheCompany’sordinarysharesareadmittedtothepremiumlistingsegmentofthe Official List of the U.K. Listing Authority and are trading on theMainMarket of the London StockExchange.PureTechisacross-disciplinaryhealthcarecompanydevelopinginnovativeproductsthatcouldimprovethelivesofpatients.PureTechisfocusedonareasofgrowingscientificandtechnicalinsightsthatit believes are at an important inflection point, including the central nervous, gastro-intestinal andimmunesystems,andtheinteractionsandsignallingbetweenthem.PureTechhasapipelineofmorethan30 programmes and 20 clinical studies targeting multi-billion dollar market opportunities. PureTech’sadvancedprogrammesincludefivewithhumanproofofconceptandmultiplewithpivotalorregistrationstudy read-outs in the next two years. PureTech’s leading team and Board, along with an advisory

42

networkofmorethan60expertfounder-scientistsandadvisersacrossmultipledisciplines,givesPureTechaccesstopotentiallyground-breakingscienceandtechnological innovation.Withhealthcareundergoingmajortransformation,PureTechiswellpositionedtodevelopandlaunchmedicinesforthe21stcentury.The Group provides a combination of experienced management and administrative support to itsbusinesses in which it typically holds a significant ownership interest. Cash contributed by PureTechHealth plc to its subsidiaries is used to fund research and to create a management structure andoperations.TheAnnual Report andAccounts of PureTech and its subsidiaries are presented for the year ended31December2015.TheGroup financial statementsconsolidate thoseof theCompanyand its subsidiaries.TheGroupfinancialstatementshavebeenpreparedandapprovedbytheDirectorsinaccordancewiththeInternational Financial Reporting Standards, International Accounting Standards, and Interpretations(collectively “IFRS”) issuedby the InternationalAccounting StandardsBoard (“IASB”) as adoptedby theEuropeanUnion(“adoptedIFRSs”).Theaccountingpoliciessetoutbelowhave,unlessotherwisestated,beenappliedconsistentlytoallperiodspresentedintheseconsolidatedfinancialstatements.BasisofmeasurementTheconsolidatedfinancialstatementshavebeenpreparedonthehistoricalcostbasis.UseofjudgementsandestimatesInpreparingtheseconsolidatedfinancialstatements,managementhasmadejudgements,estimatesandassumptionsthataffect theapplicationof theGroup’saccountingpoliciesandthereportedamountsofassets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates andunderlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognisedprospectively.

SignificantestimatesaremadebytheGroupwhendeterminingtheappropriatemethodologyforvaluingthesubsidiarybusinessesfordisclosurepurposesandtheninderivingtheestimatedfairvalue includingmaking certain estimates of the future earnings potential of the businesses and determining theappropriatediscountrate.Significantjudgementisappliedindetermining: • valuationofaggregateholdingsofgrowthstagebusinesses;

• valuationofwarrants,convertiblenotesandderivatives;

• financialinstrumentclassification(debtvs.equity);

• revenuerecognition.Informationaboutthesecriticaljudgementsandestimatesisincludedinthefollowingnotes.GoingconcernAftermakingenquiriesandconsideringtheimpactofrisksandopportunitiesonexpectedcashflows,theDirectors have a reasonable expectation that the Group has adequate cash to continue in operationalexistencethroughtheperiodendedDecember2018.FollowingtheequityofferingwhichoccurredinJune2015, the Group has sufficient cash reserves to continue to provide capital to its existing portfoliobusinessesandtocreateandfundprojectphaseandgrowthstagebusinessesatasimilarratetopreviousyearsthrough2018,assumingbroadlyourexpectedlevelofrequiredinvestmentsinbusinessesandotheroperatingexpenditures.

43

BasisofconsolidationThe Companywas formedon 8May 2015.On 18 June 2015, a reorganisation of PureTech’s corporatestructurewas completed throughwhich theCompanybecame the sole owner of PureTechHealth, LLC(“PureTech LLC”). Preceding this reorganisation, on 18 June 2015 each outstanding PureTech LLCpreferredsharewasconvertedintooneSeries1CommonShareofPureTechLLC.Thereafter,pursuanttoanagreemententeredintobetweentheCompany,PureTechLLCandeachofthemembersofPureTechLLCwhohad signed joinder signaturepages, the issuedandoutstandingPureTech LLCCommonShareswereexchangedas follows: (i)eachSeries1CommonSharewasexchanged for10OrdinaryShares; (ii)each Series 2 Common Share was exchanged for Ordinary Shares in the Company on the basis of anexchangeratiocalculatedbyreferenceto10OrdinarySharesforeachSeries2CommonShare,adjustedfor the currencyexchange rateof £1:$1.5648and to takeaccountof the Series2CommonShare floorprice of $4.31 per share associated with each Series 2 Common Share so exchanged, with each suchnumber of Ordinary Shares to be issued by the Company being rounded down to the nearest wholenumber;and(iii)eachSeries3CommonSharewasexchangedforOrdinarySharesintheCompanyonthebasis of an exchange ratio calculated by reference to ten Ordinary Shares for each Series 3 CommonShare,adjustedforthecurrencyexchangerateof£1:$1.5648andtotakeaccountoftheSeries3CommonShare floorpriceof $11.45per shareassociatedwitheachSeries3CommonShare soexchanged,witheachsuchnumberofOrdinarySharestobe issuedbytheCompanybeingroundeddowntothenearestwholenumber.ThishasbeenaccountedforasacommoncontroltransactionunderIFRS3.B1(seenote13),thereforetheconsolidatedfinancialinformationforeachoftheyearsended31December2015and2014 comprises an aggregation of financial information of the Company and the consolidated financialinformationofPureTechLLC.SubsidiariesSubsidiaries are entities that are controlled by the Group. The Group controls an entity when it is exposedto,orhastherightsto,variablereturnsfromitsinvolvementwiththeentityandhastheabilitytoaffectthosereturnsthroughitspowerovertheentity.ForentitiesforwhichtheGroup’sownershippercentageis less than 50 percent, which are Gelesis and its subsidiaries, it was determined that the Group hascontrolof theseentities as theGroup controls themajorityof theboardofdirectors,holds the largestequityshareholdingofGelesisandhasemployeesasmembersofGelesis’management.SubsidiariesarefullyconsolidatedfromthedateonwhichtheGroupobtainscontrolandcontinuetobeconsolidated until the date when control ceases. A list of all subsidiaries and the Group’s ownership,basedonoutstandingvotingcommonandpreferredshares, isoutlinedbelow.Asdiscussed innote14,certainoftheGroup’ssubsidiaries’outstandingpreferredshareshavebeenclassifiedasaliability.

Subsidiary(4) Ownershippercentageofvotingstockasat31December(3)

Significantsubsidiaries 2015 2014AkiliInteractiveLab,Inc. 64.40% 64.40%Alivio Therapeutics, Inc. 100.00% n/aCommenseInc. 100.00% 100.00%EnlightBiosciences,LLC 86.00% 86.00%Endra,Inc.(indirectlyheldthroughEnlight) 12.90% 12.90%EntregaInc.(indirectlyheldthroughEnlight) 85.90% 85.90%FollicaIncorporated 72.10% 72.10%Gelesis,Inc. 22.10% 34.40%Gelesis,S.r.l.(indirectlyheldthroughGelesis) 22.10% 34.40%

44

Gelesis,LLC(indirectlyheldthroughGelesis) 22.10% 34.40%KarunaPharmaceuticals,Inc. 90.70% 90.70%KnodeInc.(indirectlyheldthroughEnlight) 86.00% 86.00%MandaraSciences,LLC 98.30% 98.30%The Sync Project Inc. 100.00% 100.00%Appeering,Inc. 100.00% 100.00%PureTechManagement,Inc. 100.00% 100.00%PureTechHealth,LLC(1) 100.00% n/aSondeHealth,Inc. 100.00% n/aT1DInnovationsLLC(2) n/a 98.80%TalMedical,Inc. 64.50% 79.80%VedantaBiosciences,Inc. 100.00% 100.00%VorBiopharmaInc. 100.00% n/aNontradingholdingcompaniesEndraHoldings,LLC(heldindirectlythroughEnlight) 86.00% 86.00%EnsofHoldings,LLC(heldindirectlythroughEnlight) 86.00% 86.00%Gelesis2012,Inc.(heldindirectlythroughGelesis) 22.10% 34.40%PureTechSecuritiesCorp. 100.00% n/aInactivesubsidiariesEnsofBiosystems,Inc.(heldindirectlythroughEnlight)

86.00% 86.00%

LibraBiosciences,Inc. 100.00% 100.00%

Notes:(1)On18 June2015PureTechHealthplc completeda reorganisationof the corporate structureof thegroup of companies controlled by its predecessor PureTech Health, LLC pursuant to which PureTechHealthplcbecametheholdingcompanyoftheGroup.(2)On12March2015theT1DInnovationsLLCentitywasdissolved.(3) Represents ownership percentage used in allocations to non-controlling interests except for Akili,Entrega, Mandara, Karuna, Follica, Tal and Gelesis in which cases the percentage allocated to non-controlling interests was 100%, 0%, 2%, 0%, 81%, 0% and 50%, respectively, where in these cases thereareliabilityclassifiedpreferredsharesinissue.(4)AllsubsidiariesareregisteredintheU.S.exceptforGelesis,S.r.l.whichisregisteredinItaly.The financial information of the subsidiaries is prepared for the same reporting period as the parentCompany,usingconsistentaccountingpolicies.Allintragroupbalances,transactions,unrealisedgainsandlossesresultingfromintragrouptransactionsanddividendsareeliminatedinfull.Lossesattributedtononcontrolling interests are allocated to the non controlling interests even if doing so causes the noncontrollingintereststohaveadeficitbalance.FunctionalandpresentationcurrencyThese consolidated financial statements are presented in U.S. dollars. The functional currency of allmembersoftheGroupistheU.S.Dollar,exceptforanItaliansubsidiarywhosefunctionalcurrencyistheEuro. The assets and liabilities of this subsidiary are translated to U.S. Dollars at the exchange rate

45

prevailingonthebalancesheetdateandrevenuesandexpensesaretranslatedattheaverageexchangerate for the period. Foreign exchange differences resulting from the translation of this subsidiary arereportedinothercomprehensiveincome/(loss).

Foreign currencyTransactions in foreign currencies are translated into the functional currencies of the Group using theexchangeratesprevailingonthedateofthetransactions.Monetaryassetsandliabilitiesdenominatedinforeign currencies are translated to the functional currency on the balance sheet date. Exchangedifferencesarerecognisedinprofitorloss.Nonmonetarybalancesthatarenotre-measuredatfairvaluearetranslatedtothefunctionalcurrencyattheexchangerateprevailingonthetransactiondate.CashandcashequivalentsCashandcashequivalentsincludeallhighlyliquidinstrumentswithoriginalmaturitiesofthreemonthsorless.FinancialinstrumentsFinancialassetsTheGroup’s financialassetsconsistofcashandcashequivalents, tradeandotherreceivables,debtandequity securities and security and other deposits. The Group’s financial assets are classified into thefollowing categories: available for sale and trade and other receivables. The Group determines theclassification of financial assets at initial recognition depending on the purpose forwhich the financialassetswereacquired.Available for sale financialassetsarenonderivative instruments thataredesignated in thiscategoryornot classified in any other category. These financial assets are initially measured at fair value andsubsequently re-measured at fair value at each reporting date. Unrealised gains and losses are recognisedinothercomprehensiveincome/(loss).Availableforsalefinancialassetsarepresentedintheconsolidatedbalancesheetsasnoncurrentassets,unlesstheGroup intendstodisposeofthemwithin12monthsoftheendofthereportingperiod.Tradeandotherreceivablesarenonderivativefinancialassetswithfixedanddeterminablepaymentsthatare not quoted on active markets. These financial assets are carried at the amounts expected to bereceivedlessanyallowancefordoubtfuldebts.Provisionsaremadewherethereisevidenceofariskofnonpayment, taking into account ageing, previous experience andeconomic conditions.Whena tradereceivable isdeterminedtobeuncollectible, it iswrittenoffagainst theavailableprovisionandthentotheconsolidatedstatementsofcomprehensive loss.Tradeandotherreceivablesare includedincurrentassets,unlessmaturitiesaregreaterthan12monthsaftertheendofthereportingperiod.FinancialliabilitiesTheGroup’sfinancialliabilitiesconsistofsubsidiarynotespayable,subsidiarypreferredshares,tradeandotherpayables,subsidiaryderivativeliabilityandsubsidiarywarrantliability.Subsidiarynotespayableandtradeandotherpayablesare initiallyrecognisedatfairvalue lessthevalueattributedtoanyseparatelyaccounted for embedded derivatives. Subsequent to initial recognition these financial liabilities aremeasuredatamortisedcostusingtheeffectiveinterestmethod.Theamortisationisincludedinfinancialcostscontractualintheconsolidatedstatementsofcomprehensiveloss.Derivativeliabilitiesincludefeatureswithinthesubsidiarynotespayableandsubsidiarypreferredsharesthat require bifurcation from the notes under IAS 39; Financial Instruments: Recognition and

46

Measurementand liabilityclassifiedwarrants.Derivative liabilitiesarecarriedat fairvaluewithchangesrecognised in finance costs in the consolidated statements of comprehensive loss (seenote 20). In thecaseofsubsidiarypreferredsharesclassifiedasacurrentliability,theexpectedamountatconversionorsettlementandtheassociatedtimingofanyconversionisassessedateachreportingperiod.Totheextentnecessary, any expected additional liability is accreted to the balance of the liability over the anticipatedperiodundertheeffectiveinterestratemethod.

TheGroupderecognisesafinancial liabilitywhenitscontractualobligationsaredischarged,cancelledorexpire.

FinancialinstrumentsissuedbytheGroupFollowingtheadoptionofIAS32,financialinstrumentsissuedbytheGrouparetreatedasequityonlytotheextentthattheymeetthefollowingtwoconditions:1. TheyincludenocontractualobligationsupontheGrouptodelivercashorotherfinancialassetsorto

exchange financial assets or financial liabilities with another party under conditions that arepotentiallyunfavourabletotheGroup;and

2. WheretheinstrumentwillormaybesettledintheGroup’sownequityinstruments,itiseitheranonderivative that includes no obligation to deliver a variable number of the Group’s own equityinstrumentsorisaderivativethatwillbesettledbytheGroupexchangingafixedamountofcashorotherfinancialassetsforafixednumberofitsownequityinstruments.

To theextent that thisdefinition isnotmet, the financial instrument is classifiedasa financial liability.Where the instrument so classified takes the legal form of the Group’s own shares, the amountspresented inthefinancial informationforsharecapitalandmergerreserveaccountexcludeamounts inrelationtothoseshares.Derivative and warrant policyEquity conversion features and put options within host instruments that meet the definition of aderivative and have economic and risk characteristics that are not closely related to the host areconsidered embedded derivatives and are bifurcated from the host and accounted for separately. TheGroup has recognised embedded derivative liabilities related to features within convertible notes andconversionfeatureswithsubsidiarypreferredshares.Derivativefinancialliabilitiesareinitiallyrecordedatfairvalueandarere-measuredtofairvalueateachperiodendwhilesuchinstrumentsareoutstanding,with gains and losses arising from changes in fair value recognised in finance costs in the consolidatedstatementsofcomprehensiveloss.Theembeddedderivativeliabilitiesarebeingvaluedusingaprobabilityweightedexpectedreturnmodeloranoptionpricingallocationmodel.TheGroupderecognises the embeddedderivative liabilitywhen thehost instrument is extinguishedorconvertedorwhenthefeaturenolongermeetsthedefinitionofaderivative.The Group has recognised common stock and preferred stockwarrants on subsidiary shares issued toinvestors and note holders. Warrants are recognised as derivative financial liabilities if the underlyingsharesareliabilityclassifiedorthetermsofthewarrantsarenotfixedduetopotentialadjustmentsintheexercisepriceand/orthenumberofsharesissuableunderthewarrants.Warrantliabilitiesarerecordedat fair value,with gains and losses arising fromchanges in fair value recognised in finance costs in theconsolidated statements of comprehensive loss at each period end while such instruments areoutstanding.ThewarrantliabilitieswerevaluedusingaBlackScholesoptionpricingmodel.

47

TheGrouphasalsorecognisedcommonstockwarrantsissuedtoinvestorswhichareclassifiedinequityandinitiallymeasuredatfairvalueusingaBlackScholesoptionpricingmodel.SharecapitalOrdinary shares are classified as equity. The Group considers its capital to comprise share capital, sharepremium,mergerreserve,otherreserve,translationreserve,andaccumulateddeficit.PropertyandequipmentPropertyandequipmentisstatedatcostlessaccumulateddepreciationandanyaccumulatedimpairmentlosses.Costincludesexpenditurethatisdirectlyattributabletotheacquisitionoftheasset.AssetsunderconstructionrepresentleaseholdimprovementsandmachineryandequipmenttobeusedinoperationsorR&Dactivities.Whenpartsofanitemofpropertyandequipmenthavedifferentusefullives,theyareaccounted for as separate items (major components) of property and equipment. Depreciation iscalculatedusingthestraight-linemethodovertheestimatedusefullivesoftherelatedassets:

Laboratoryandmanufacturingequipment 2-8years

Furnitureandfixtures 7years

Computerequipmentandsoftware 1-5years

Leaseholdimprovements 5-10years,ortheremainingtermofthelease,ifshorter

Depreciation methods, useful lives and residual values are reviewed at least annually and adjusted ifappropriate.IntangibleassetsIntangible assets, which include purchased patents and licences with finite useful lives, are carried athistoricalcostlessaccumulatedamortisationandimpairmentlosses.Amortisationiscalculatedusingthestraightlinemethodtoallocatethecostsofpatentsandlicencesovertheirestimatedusefullives,whichistypicallytheremaininglifeoftheunderlyingpatents.TaxationTaxontheprofitorlossfortheyearcomprisescurrentanddeferredtax.Taxisrecognisedintheincomestatementexcept to theextent that it relates to items recogniseddirectly in equity, inwhich case it isrecognisedinequity.TheGroupelectednot to fileaconsolidatedFederal tax return for theyearsended31December2015and2014.TheGrouphaselectedtofileindividualreturnsatthesubsidiarylevel.CurrentIncomeTaxCurrenttaxistheexpectedtaxpayableorreceivableonthetaxableincomeorlossfortheyear,usingtaxratesenactedorsubstantiallyenactedatthereportingdate,andanyadjustmenttotaxpayableinrespectofpreviousyears.DeferredIncomeTaxDeferred tax is recognised in respectof temporarydifferencesbetween the carryingamountsof assetsandliabilitiesforfinancialreportingpurposesandtheamountsusedfortaxationpurposes.Deferredtax

48

assetsarerecognisedforunusedtax losses,unusedtaxcreditsanddeductibletemporarydifferencestotheextentthatitisprobablethatfuturetaxableprofitswillbeavailableagainstwhichtheycanbeused.Deferredtaxassetsarereviewedateachreportingdateandarereducedtotheextentthatitisnolongerprobablethattherelatedtaxbenefitwillberealised.

Deferredtaxismeasuredatthetaxratesthatareexpectedtobeappliedtotemporarydifferenceswhentheyreverse,usingtaxratesenactedorsubstantivelyenactedatthereportingdate.Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current taxliabilitiesandassets,andtheyrelatetotaxesleviedbythesametaxauthorityonthesametaxableentity,orondifferent taxentitieswhere theGroup intends to settle current tax liabilitiesandassetsonanetbasisortheirtaxassetsandliabilitieswillberealisedsimultaneously.Deferred taxes are recognised in profit or loss except to the extent that it relates to items recogniseddirectlyinequityorinothercomprehensiveincome.ImpairmentImpairmentofNon-FinancialAssetsThe Group reviews the carrying amounts of its property and equipment and intangible assets at eachreportingdatetodeterminewhetherthereisanyindicationofimpairment.Ifanysuchindicationexists,thenanasset’srecoverableamountisestimated.Therecoverableamountisthehigherofanasset’sfairvalue less cost of disposal and value inuse.An impairment loss is recognisedwhenan asset’s carryingamountexceeds its recoverableamount.For thepurposesof impairment testing,assetsaregroupedatthelowestlevelsforwhichtherearelargelyindependentcashflows.Ifanonfinancialassetinstrumentisimpaired,animpairmentlossisrecognisedinprofitandloss.

ImpairmentofFinancialAssetsCarriedatFairValueThe Group’s available for sale financial assets are carried at fair value through other comprehensiveincome/(loss) and are reviewedat each reportingperiod to assesswhether there is objective evidencethat the assets should be impaired. An impairment loss is recognised when there is a significant orprolongeddeclineinfairvaluebelowtheinstrument’scost.Ifaninstrumentisimpaired,theimpairmentloss is calculated and recognised in profit and loss. The only amounts reclassified from othercomprehensiveincome/(loss)intooperatinglosswererealisedgainsrelatedtothesaleofaninvestment.ImpairmentofFinancialAssetsMeasuredatAmortisedCostTheGroupassessesfinancialassetsmeasuredatamortisedcostforimpairmentateachreportingperiod.Thesefinancialassetsareimpairedifoneormorelosseventsoccursafterinitialrecognitionthatimpacttheestimatedfuturecashflowsoftheasset.Animpairmentlossiscalculatedasthedifferencebetweenits carryingamountand thepresent valueof theestimated future cash flowsdiscountedat theasset’soriginaleffectiveinterestrateandisrecognisedinprofitorloss.Share-basedPaymentsTheGroupissuessharestoemployeesandnonemployeesasequity-basedcompensation.The grant date fair value of share-based payment awards granted to employees is recognised as anemployeeexpense,withacorrespondingincreaseinequity,overtheperiodthattheemployeesbecomeunconditionally entitled to the awards. The options granted to employees aremeasured at fair value,usingthetermsandconditionsuponwhichtheoptionsweregranted.Thetotalamounttobeexpensedisdeterminedbyreferencetothefairvalueoftheoptionsgranted,adjustedfortheimpactofanymarket

49

performance,serviceconditionsandothernonmarketperformancevestingconditions.Forshare-basedpayment awards with non vesting conditions, the grant date fair value of the share-based payment ismeasuredtoreflectsuchconditionsandthereisnotrueupfordifferencesbetweenexpectedandactualoutcomes.

The fair value of the share-based compensation to non employees is re-measured at fair value as theawardvests.Thefairvalueofservicesreceivedinexchangeforsharesisdeterminedusingthefairvalueofthesharethatwasissued,whichistypicallytheissuepriceoftheshare.EmployeebenefitsShorttermemployeebenefitsShorttermemployeebenefitobligationsaremeasuredonanundiscountedbasisandareexpensedastherelatedserviceisprovided.AliabilityisrecognisedfortheamountexpectedtobepaidiftheGrouphasapresent legal or constructive obligation to pay this amount as a result of past service provided by theemployee,andtheobligationcanbeestimatedreliably.DefinedcontributionplansA defined contribution plan is a post-employment benefit plan under which an entity pays fixedcontributions intoa separateentityandhasno legalorconstructiveobligation topay furtheramounts.Obligations for contributions to defined contribution plans are recognised as an employee benefitexpense in theperiodsduringwhich relatedservicesare renderedbyemployees.Prepaidcontributionsarerecognisedasanassettotheextentthatacashrefundorareductioninfuturepaymentsisavailable.ProvisionsA provision is recognised in the balance sheet when the Group has a present legal or constructiveobligation as a result of a past event, that can be reliably measured and it is probable that an outflow ofeconomicbenefitswillberequiredtosettletheobligation.Provisionsaredeterminedbydiscountingtheexpectedfuturecashflowsatapre-taxratethatreflectsrisksspecifictotheliability.RevenuerecognitionRevenueisderivedprimarilyfromfeesrelatedtosubscriptionagreements,collaborationagreementsandgovernment grants entered into by the Group’s subsidiaries. Revenue ismeasured at the fair value ofconsiderationreceivedorreceivableandisrecognisedinaccordancewithIAS18Revenuewheneachofthefollowingcriteriaforrevenuerecognitionhavebeenmet:• the amount of revenue and costs incurred or to be incurred in respect of the transaction can be

measuredreliably;• theentityhas transferred to thebuyer thesignificant risksandrewardsofownershipof thegoods,

anditisprobablethattheeconomicbenefitsassociatedwiththetransactionwillflowtotheGroup;and,

• whentheoutcomecanbeestimatedreliably,revenueassociatedwiththetransactionisrecognisedbyreferencetothestageofcompletionofthetransactionattheendofthereportingperiod.

The Group recognises revenue from services under subscription and collaboration agreements in theperiod in which the services are rendered, on a straight line basis or assessed by the percentage ofcompletion method over the period to which services relate. Revenue from government grants isrecognisedwhenthereisreasonableassurancethattheentitywillcomplywiththeconditionsattachingtoit,andthatthegrantwillbereceived.TheGroupsubmitsqualifyingexpensesandcapitalpurchasesforreimbursement only after qualifying for the grant programmes, which occur after capital purchasesand/orresearchanddevelopmentcostshavebeenincurred.

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DeferredrevenueanddeferredcostsDeferred revenue includesamounts thathavebeenbilledper thecontractual termsbuthavenotbeenrecognised as revenue. Deferred costs represent direct costs related to deferred revenues and includecapitalised labour and research and development expenditures. The Company classifies as non-currenttheportionofdeferredrevenueanddeferredcoststhatareexpectedtoberecognisedbeyondoneyear,oroneoperatingcycle.FinanceincomeandfinancecostsFinance incomemainlycomprises interest incomeonfunds invested. Interest income isrecognisedas itaccruesinprofitorloss,usingtheeffectiveinterestmethod.Financecostscompriseloaninterestexpenseand the changes in the fair value of warrant and derivative liabilities associated with financingtransactions.OtherincomeOther income includes a research and development tax credit related to a subsidiary. Other income isrecognisedbasedonthecontractualtermsoftheagreement.FairvaluemeasurementsAnumberoftheGroup’saccountingpoliciesanddisclosuresrequirethemeasurementoffairvalues,forbothfinancialandnon-financialassetsandliabilities.Whenmeasuring the fair valueofanassetora liability, theGroupusesmarketobservabledata to theextent possible. Fair values are categorised into different levels in a fair value hierarchy based on theinputs used in the valuation techniques as follows:• Level1:quotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities.• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or

liability,eitherdirectly(i.e.asprices)orindirectly(i.e.derivedfromprices).• Level3: inputsfortheassetor liabilitythatarenotbasedonobservablemarketdata(unobservable

inputs).Iftheinputsusedtomeasurethefairvalueofanassetoraliabilitymightbecategorisedindifferentlevelsofthefairvaluehierarchy,thenthefairvaluemeasurementiscategorisedinitsentiretyinthesamelevelof the fair value hierarchy as the lowest level input that is significant to the entiremeasurement. TheGrouprecognisestransfersbetweenlevelsofthefairvaluehierarchyattheendofthereportingperiodduringwhichthechangehasoccurred.Thecarryingamountofcashandcashequivalents,accountsreceivable,shortterminvestments,restrictedcash, deposits, accounts payable, accrued expenses and other current liabilities in the Group’sconsolidatedstatementsoffinancialpositionapproximatestheirfairvaluebecauseoftheshortmaturitiesoftheseinstruments.OperatingleasesThe Group classifies leases as either finance or operating leases at inception, depending on whethersubstantiallyall the risksand rewardsofownership transfer to theGroup. Leaseswhere the lesseehassubstantiallyalloftherisksandrewardsofownershipareclassifiedasfinanceleases.Allotherleasesareclassifiedasoperatingleases.TheGrouphadonlyoperatingleasesduringthereportingperiods.Payments

51

madeunderoperatingleasesarerecognisedinprofitorlossonastraightlinebasisoverthetermofthelease. Lease incentives received are recognised as an integral part of the total lease expense, over thetermofthelease.Operating segmentsOperatingsegmentsarereported inamanner that isconsistentwith the internal reportingprovidedtothechiefoperatingdecisionmaker (“CODM”).TheCODMreviewsdiscrete financial information for theoperating segments inorder toassess theirperformanceand is responsible formakingdecisionsaboutresourcesallocatedtothesegments.TheCODMhasbeenidentifiedastheDirectors.2.Newstandardsandinterpretationsnotyetadopted A number of new standards, interpretations, and amendments to existing standards are effective forannualperiodsbeginningafter1January2016,andhavenotbeenappliedinpreparingtheconsolidatedfinancial information. Management has yet to complete an analysis of these new standards,interpretationsandamendmentstoexistingstandardsontheresultsofitsoperations,financialposition,anddisclosures.TheGroupintendstoadoptthesestandardsontheirrespectiveeffectivedates.ThefollowingthreeareamendedornewstandardsandinterpretationsthatmayimpacttheGroup:

IFRS9,FinancialinstrumentsThestandardaddressestheclassification,measurementandrecognitionoffinancialassetsandliabilities.ThecompleteversionofIFRS9wasissuedinJuly2014.ItreplacestheguidanceinIAS39thatrelatestothe classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixedmeasurement model and establishes three primary measurement categories for financial assets:amortised cost, fair value throughOCI and fair value throughprofit and loss. Thebasisof classificationdepends on the entity’s business model and the contractual cash flow characteristics of the entity’sbusinessmodelandthecontractualcashflowcharacteristicsofthefinancialasset.InvestmentsinequityinstrumentsarerequiredtobemeasuredatfairvaluethroughprofitorlosswiththeirrevocableoptionatinceptiontopresentchangesinfairvalueinOCInotrecycling.ThereisnowanewexpectedcreditlossesmodelthatreplacestheincurredlossimpairmentmodelusedinIAS39.ForfinancialliabilitiestherewerenochangestoclassificationandmeasurementexceptfortherecognitionofchangesinowncreditriskinOther comprehensive income/(loss), for liabilities designatedat fair value throughprofit or loss. IFRS9relaxestherequirementsforhedgeeffectivenessbyreplacingthebrightlinehedgeeffectivenesstests.Itrequiresaneconomicrelationshipbetweenthehedgeditemandhedginginstrumentandforthe‘hedgedratio’ to be the same as the one management actually use for risk management purposes.ContemporaneousdocumentationisstillrequiredbutisdifferenttothatcurrentlypreparedunderIAS39.Thestandardiseffectiveforaccountingperiodsbeginningonorafter1January2018andearlyadoptionispermitted.TheGroupisintheprocessofassessingtheimpactofIFRS9.IFRS15,RevenuefromcontractswithcustomersThestandarddealswithrevenuerecognitionandestablishesprinciplesforreportingusefulinformationtousers of financial information about the nature, amount, timing and uncertainty of revenue and cashflowsarisingfromanentity’scontractswithcustomers.Revenueisrecognisedwhenacustomerobtainscontrolofagoodor serviceand thushas theability todirect theuseandobtain thebenefits fromthegoodorservice.Thestandardreplaces IAS18‘Revenue’andIAS11‘Constructioncontracts’andrelatedinterpretations. The standard is amended to be effective for annual periods beginning on or after 1January2018and earlier application is permitted.Managementhas yet to complete ananalysis of thisnewstandardanditsimpact.

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IFRS16,LeasesThestandardchangesfundamentallytheaccountingforleasesbylessees.IteliminatesthecurrentIAS17dual accounting model, which distinguishes between on-balance sheet finance leases and off-balancesheetoperatingleasesand,instead,introducesasingle,on-balancesheetaccountingmodelthatissimilartocurrentfinance leaseaccounting.Thestandard iseffectiveforannualperiodsbeginningonorafter1January2019andearlier application is permitted.Managementhas yet to complete ananalysis of thisnewstandardanditsimpact.

TherearenootherIFRSorIFRICinterpretationsthatarenotyeteffectivethatwouldbeexpectedtohaveamaterialimpactontheGroup.

3.Revenue

Revenuerecordedinthestatementofcomprehensivelossconsistsofthefollowing:

Fortheyearsended31December:

2015$000s

2014$000s

Subscriptionfees 1,175 1,750Collaborationrevenue 10,565 262Grantrevenue 88 210Totalrevenue 11,828 2,222

Deferredrevenuerecordedintheconsolidatedstatementsoffinancialpositionconsistsofthefollowing:

Asat31December:

2015$000s

2014$000s

Subscriptionfees 333 816Collaborationrevenue 2,040 2,380Grantrevenue 85 97Deferred revenue, current 2,458 3,293Subscriptionfees — 142Grantrevenue 291 419Deferredrevenue,non-current 291 561Totaldeferredrevenue 2,749 3,854

4.Operatingsegments

Basis for segmentationTheDirectors are theGroup’s strategic decisionmakers. TheGroup’s operating segments are reportedbased on the financial information provided to the Directors at least quarterly for the purposes ofallocating resources and assessing performance. The Directors monitor the results of two operatingsegments.Eachoperatingsegment is consideredadistinctunitby theDirectors.TheGroup’soperatingsegments,whicharealso reportable segments,areoutlinedbelow.Substantiallyallof the revenueandprofitgeneratingactivitiesof theGrouparegeneratedwithin theU.S.andaccordingly,nogeographicaldisclosuresareprovided.

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GrowthstagebusinessesBusinessesinthissegmentarethosewhoseactivitiesfocusonactivelydevelopingproductstosolvemajorhealthcare problems in varied markets. All businesses shown below are included in one operatingsegmentwhichisalsoareportablesegment:

Subsidiary Principal Activities & Target MarketVedantaBiosciences Apreclinicalstagecompanydevelopingamicrobiomeimmunesystemdrug-

discoveryplatformanddrugcandidatesforthetreatmentofimmune-mediateddiseases.

Gelesis AclinicalstagecompanydevelopingproductsthatseektoinduceweightlossandpotentiallyimproveglycaemiccontrolthroughanorallyadministeredcapsulethatexpandsintheGItractasitabsorbswater.

Akili Aclinicalstagecompanydevelopingtechnologyandproductsforthescreening, diagnosis and treatment of neurological disorders such as ADHD,autismanddepressionthroughcomputersoftware.

Tal Aclinicalstagemedicaldevicecompanydevelopinganinnovative,noninvasiveneurostimulationtreatmentforpsychiatricdisordersincludingdepressionandbipolardisorder.

Karuna Aclinicalstagecompanydevelopinganinnovativecombinationtherapyforthetreatmentofschizophrenia.

Entrega Apreclinicalstagecompanydevelopingadrugplatformfortheoraladministrationofproteins,peptidesandotherdifficult-to-deliverpayloads,includingmagneticnanoparticles.

Follica Aclinicalstagecompanydevelopingproductstogeneratenewhumanhairfolliclesandhair.

ProjectphasebusinessesBusinessesinthissegmentarethosewhoseactivitiesarefocusedonfinancing,sourcingandcreatingnewproductcandidatesandnewlycreatedbusinesseswhosetechnologiesareintheprocessofvalidation.Thissegmentincludesthefollowingbusinesses:

Subsidiary PrincipalActivities&TargetMarketProjectphasebusinessesTheSyncProject Developingaplatformandproductsthatseektoexploreandleveragethe

healthpotentialofmusicbyutilisingaplatformthattakesinphysiologicaldatafromsensorsandcorrelatesthatdatawithmusicaldatacomponents(e.g.beatandrhythm).

SondeHealth Developingvoice-basedtoolsforthepassiveassessmentandtrackingofpatienthealth.

Commense Developingcommensalorganism-basedproductsfortheimprovementofhumanhealthin,forexample,earlychildhood.

Alivio Developingaproprietarydrugdeliveryplatformfordrugsthattreatinflammationandassociateddisorders.

Vor Developingnoveltargetedimmunotherapiesforcancer.OtherbusinessesEnlightBiosciences,LLC Developmentofdigitalhealthtechnologies.MandaraSciences,LLC Improvementofhealththroughfoodthroughthecreationofinnovative

nutritiontechnologycompanies.Knode Atechnologyplatformbeingdevelopedtoidentifyexpertsinhealthcareand

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otherresearch-baseddisciplinesbasedonthecontenttheyhaveproduced.Appeering Identifyinghealthcareexpertnetworksandreviewingtheirconversations

andcontentonsocialmedia.

TheGroupexpectssubsidiarieswithintheprojectphasewillbecomegrowthstagebusinesses.Uponthetransition of a project phase business to the growth stage, the Group plans to retrospectively restateoperatingsegmentsasifthesubsidiaryhadbeenagrowthstagebusinessforallperiodspresented.

InformationaboutreportablesegmentsThefollowingprovidesdetailed informationoftheGroup’stworeportablesegmentsandParentactivityasofandfortheyearsended31December2015and2014,respectively:

2015Growth

stagebusinesses

$000s

Projectphase

businesses$000s

Parentcompany&

other$000s

Consolidated$000s

ConsolidatedStatementsofComprehensiveLossRevenue 10,189 1,639 — 11,828Generalandadministrativeexpenses

(14,672) (1,377) (20,422) (36,471)

Research and developmentexpenses

(17,736) (981) (282) (18,999)

Totaloperatingexpenses (32,408) (2,358) (20,704)(2) (55,470)(1)Otherincome 448 — — 448Netfinancecosts (13,725) (4) 603 (13,126)Lossfromcontinuingoperations

(35,496) (723) (20,101) (56,320)

Provisionforincometaxes (2,158) (85) 319 (1,924)Lossfortheyear (37,654) (808) (19,782) (58,244)Othercomprehensiveincome/(loss)

(262) — 24 (238)

TotalComprehensiveLossfortheYear

(37,916) (808) (19,758) (58,482)

Totalcomprehensivelossattributableto:OwnersoftheCompany (19,032) (523) (20,076) (39,631)Non-controllinginterests (18,651) (200) — (18,851)ConsolidatedStatementsofFinancialPositionTotalassets 68,350 1,509 256,896 326,755Totalliabilities 168,224 2,969 (8,491) 162,702Net(liabilities)/assets (99,874) (1,460) 265,387 164,053

(1) For 2015, operatingexpenses forour reportable segments, Parent companyandother and in total,statedpriortoshare-basedcompensation,depreciationandamortisationwere$27.9million,$2.3million,$13.4millionand$43.6million forgrowth stagebusinesses,projectphasebusinesses,Parent companyandotherandintotal,respectively.

(2)Parentcompanyandotheroperatingexpenses furtheradjusted for thecostofprofessional servicestotalling$5.5millionassociatedwithourIPO,whichisnon-recurringinnature,was$7.9millionfor2015.

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2014Growthstage

businesses$000s

Projectphase

businesses$000s

Parentcompany&

other$000s

Consolidated$000s

ConsolidatedStatementsofComprehensiveLossRevenue 219 2,003 — 2,222Generalandadministrativeexpenses

(8,288) (2,278) (3,831) (14,397)

Research and developmentexpenses

(4,905) (279) (86) (5,270)

Totaloperatingexpenses (13,193) (2,557) (3,917) (19,667)Netfinancecosts (59,043) (4) 271 (58,776)Lossfromcontinuingoperations

(72,017) (558) (3,646) (76,221)

Provisionforincometaxes 278 — — 278Loss for the year (71,739) (558) (3,646) (75,943)Othercomprehensiveincome/(loss)

— — 58 58

TotalComprehensiveLossfortheYear

(71,739) (558) (3,588) (75,885)

Totalcomprehensivelossattributableto:OwnersoftheCompany (37,439) (558) (3,588) (41,585)Non-controllinginterests (34,300) — — (34,300)ConsolidatedStatementsofFinancialPositionTotalassets 15,710 1,421 53,897 71,028Totalliabilities 95,749 2,067 (3,475) 94,341Net(liabilities)/assets (80,039) (646) 57,372 (23,313)TheParentcommencesinitiativesinthemes,raisescapitalforinvestmentinnewcompaniesandexistingsubsidiaries,providesother corporate shared servicesand support for all subsidiariesandmanages thenewcompanycreationprocess.TheactivitybetweentheParentandthereportingsegmentshasbeeneliminatedinconsolidation.TheseeliminationamountsareincludedintheParentCompanyandotheramountsshownabove.Theproportionofnetassets shownabove that isattributable tononcontrolling interest isdisclosed innote15.TheGroup’sexternallygeneratedrevenueoutsideoftheUnitedStateswas$89,000and$210,000fortheyearsended31December2015and2014,respectively.TheGroup’s non current assets consist of investments, property and equipment, intangible assets andother assets, ofwhich $1.2million and $1.1millionwere located in Italy as of 31December 2015 and2014,respectively.

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GrowthstagebusinessvaluationAtthecloseofeachannualfinancialperiod,theDirectorsestimate,andformallyapprove,thevalueofallgrowth stage businesses in the Group, which is used to derive the Aggregate Value of Growth StageBusinessHoldings(“AggregateHoldings”).TheAggregateHoldingswas$291.7millionand$222.4millionasat31December2015and2014,respectively.

Growthstagebusinesses

Ownershipadjustedvalueofgrowthstagebusinessholdings

2015$million

2014$million

VedantaBiosciences 83.0 67.0Gelesis 56.8 44.9Akili 45.9 26.7Tal 30.6 27.3Karuna 36.4 24.9Entrega 15.7 13.4Follica 23.3 18.2TotalGrowthStageBusinesses 291.7 222.4ThemethodologyfortheGroup’sgrowthstagebusinessvaluations,extractsofwhicharesetoutbelow,isbased on the American Institute of Certified Public Accountants’ Valuation of Privately Held CompanyEquity Securities IssuedasCompensation (“AICPAGuidelines”). TheAICPAGuidelinesdonot represent,butareconsistentwith,valuationprinciplesadoptedunderIFRS.TheAggregateHoldingsexcludescash,cashequivalentsandshort term investmentsbalancesof$255.5million and $53.2 million held at the PureTech level as at 31 December 2015 and 2014. In 2015 theAggregate Holdings includes the $11.5 million invested by PureTech in the first tranche of the AkilifinancingroundinJanuary2016.In2014AggregateHoldingsincludes,inthecaseofGelesisandTal,cashbalances (inclusive of amounts invested by PureTech) as at immediately following their March 2015financing rounds and in the case of Vedanta Biosciences the cash balance includes the non-refundablepayment from Janssen, received in January 2015 which, in conjunction with development andcommercialisation milestone payments plus tiered royalties, gives Janssen access to certain intellectualproperty.TheAggregateHoldingshasbeen calculatedon thebasis of PureTech’s percentageownership as at 31December 2015 and 2014.Wheregrowth stagebusinesses have raised financing from external partiessubsequent to 31 December 2015, the ownership adjusted value reflects the percentage ownershipimmediatelyfollowingthefinancingandthevaluationimpliedbythatexternalinvestmentonapostnewmoneybasis.InthecaseofAkiliin2015,thevalueisimmediatelyaftertheclosingofthefirsttrancheofthe financing round in January2016and in thecasesofTalandGelesis in2014asat thedateof initialclosingoffinancingroundsthatoccurredinthefirstquarterof2015.PureTech’spercentageownershiphasbeencalculatedonadilutedbasis,includingissuedandoutstandingshares and outstanding warrants and options to purchase shares, but excluding unallocated sharesauthorised tobe issuedpursuant to equity incentiveplans and any shares issuableupon conversionofoutstandingconvertiblepromissorynotes.

57

ValuationmethodologyTheAggregateHoldingsrepresentsthesumoftheparts(“SOTP”)of,principally,riskadjustednetpresentvalue (“rNPV”) from discounted cash flow (“DCF”) valuations (for Entrega, Karuna, Tal, VedantaBiosciences and Follica), and valuations basedon recent investments at thebusiness level (Gelesis andAkili). In the absence of recent arm’s length, third-party investments at the business level which couldotherwise have formed the basis for the valuations, DCF valuations are used for the valuation ofPureTech’s businesses and any anticipated royalty streams paid directly to PureTech stemming fromlicenceagreementswithsomeofthegrowthstagebusinesses.DCFvaluationsarehighlysensitivetokeyinput assumptions, including estimates associated with discount rates and projected financialperformance. Due to the stage of development of the Business Holdings, projections are particularlysensitivetocertainkeyassumptionsnamely:• DiscountrateandinparticularthevaryingcomponentsoftheEquityRiskPremium;• Theabilitytopredicttheinvestmentandtimingofachievingtechnicalandcommercialviability;• ProjectedrevenueandoperatingcostsinthepostproductdevelopmentphaseofeachBusiness;and• Thesizeandshareofaddressablemarketforintellectualproperty,productsandservicesdeveloped.NotwithstandingthefactthatthevaluationmethodologiesappliedarebasedontheAICPAGuidelinesandwhile the Directors consider the methodologies and assumptions adopted in each valuation aresupportable, reasonable and robust, because of the inherent uncertainty of valuation, those estimatedvaluesmay differ significantly from the values thatwould have been used had a readymarket for theinvestmentexistedandthedifferencescouldbesignificant.TheAICPAGuidelinesdonotrepresent,butareconsistentwith,valuationprinciplesadoptedunderIFRS.Thebusinessvaluationsarenotpresentedasalternative measures to, and should be read in conjunction with, the Group’s consolidated financialinformation.5.OperatingexpensesThe averagenumberof persons employedby theGroupduring the year, analysedby category,was asfollows:

Fortheyearsending31December: 2015 2014Generalandadministrative 28 32Researchanddevelopment 36 11Total 64 43Theaggregatepayrollcostsofthesepersonswereasfollows:

Fortheyearsending31December:

2015$000s

2014$000s

Generalandadministrative 18,093 7,230Researchanddevelopment 5,591 2,434Total 23,684 9,664

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Totaloperatingexpenseswereasfollows:

Fortheyearsending31December:

2015$000s

2014$000s

Salariesandwages 10,912 6,341Payrolltaxes 914 165Healthcarebenefits 896 305Share-basedpayments 11,095 2,811Otherpayrollcost (133) 42Total 23,684 9,664OtherSG&Aexpenses 18,378 7,167OtherR&Dexpenses 13,408 2,836Total operating expenses 55,470 19,667

Auditor’sremuneration

2015$000s

2014$000s

Auditofthesefinancialstatements 690 —Auditofthefinancialstatementsofsubsidiaries

— —

Audit-relatedassuranceservices 30 —IPO-relatedassuranceservices 2,212 —Taxation — —

2,932 —TheGrouphasincurred$2.2millionofassuranceservicecostsrelatedtotheinitialpublicofferingon24June2015.Intheprioryear,therewasnorequirementfortheGrouptocarryoutanaudit.See note 6 for further disclosures related to share-based payments and note 23 for management’sremunerationdisclosures.6.Share-basedpaymentsThePerformanceSharePlan(“PSP”)InJune2015,theCompanyadoptedthePSP.UnderthePSP,awardsoverOrdinarySharesmaybemadeto the Directors, senior managers and employees of, and other individuals providing services to theCompany and its businesses up to amaximum authorised amount of 22,724,800 ordinary shares. Theshares have various vesting terms over a period of service between two and four years, provided therecipient remainscontinuouslyengagedasaserviceprovider.Asof theyearended31December2015,theCompanyissued608,524optionstopurchasesharesunderthisplan.As of 31 December 2015, 34,273 options were exercisable. The intrinsic value of the vested portion ofsuchoptionsis$56,000.PureTechincurredstockbasedcompensationexpenseof$83,000fortheyearended31December2015.FairvaluemeasurementsThefairvalueofthesharesawardedbythePureTechDirectorsduring2015wasestimatedatthegrantdate using the Black Scholes option valuation model that uses the following weighted averageassumptions:

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2015

Expectedawardlife(inyears) 5.9Expectedawardpricevolatility 30.62%Risk-freeinterestrate 1.78%Expecteddividendyield —Grantdatefairvalue $0.75Sharepriceatgrantdate $2.28ExpectedvolatilityhasbeenbasedonanevaluationofthehistoricalvolatilityofthesharepriceofpubliclytradedcompaniescomparabletoPureTech,particularlyoverthehistoricalperiodcommensuratewiththeexpectedterm.Asthereisnotsufficienthistoricalshareexercisedatatocalculatetheexpectedtermoftheoptions,PureTechelectedtousethe‘simplified’methodforalloptionsgrantedatthemoneytovalueshare option grants. Under this approach, the weighted average expected life is presumed to be theaverageofthevestingtermandthecontractualtermoftheoption.PuretechLLCincentivestockissuanceIn 2014, PureTech LLC’s Directors approved the issuance of shares tomanagement, the Directors andadvisers.Theshareshavevariousvesting termsoveraperiodof servicebetweenzeroand threeyears,provided the recipient remains continuously engagedas a serviceprovider. Theestimated fair valueofshares, including the effect of estimated forfeitures, is recognised over the shares’ vesting period.Sharesgrantedandoutstandingat31December2015asincentiveequitybyPureTechLLCasconvertedtoplc shares were 17,993,972. 6,791,825 shares were exercisable at year end. The intrinsic value of thevestedportionofsuchsharesis$1.9million.PureTech LLC incurred stock-based compensation expense of $7.1 million and $637,000 for the yearsended31December2015and2014,respectively.FairvaluemeasurementsThefairvalueofthesharesawardedbythePureTechLLCDirectorsduring2014and2015wasestimatedatthegrantdateusingtheBlackScholesoptionvaluationmodelthatusesthefollowingweightedaverageassumptions:

2015 2014Expectedawardlife(inyears) 3.1 3.5Expectedawardpricevolatility 25.22% 25.70%Risk-freeinterestrate 0.98% 0.97%Expecteddividendyield — —Grantdatefairvalue $9.97 $0.12Sharepriceatgrantdate $19.45 $0.48

ExpectedvolatilityhasbeenbasedonanevaluationofthehistoricalvolatilityofthesharepriceofpubliclytradedcompaniescomparabletoPureTech,particularlyoverthehistoricalperiodcommensuratewiththeexpectedterm.Asthereisnotsufficienthistoricalshareexercisedatatocalculatetheexpectedtermoftheoptions,PureTechLLCelectedtousethe‘simplified’methodforalloptionsgrantedatthemoneytovalueshareoptiongrants.Underthisapproach,theweightedaverageexpectedlifeispresumedtobetheaverageofthevestingtermandthecontractualtermoftheoption.

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SubsidiaryplansCertainsubsidiariesoftheGrouphaveadoptedstockoptionplans.Asummaryofstockoptionactivitybynumberofsharesinthesesubsidiariesispresentedinthefollowingtable:

Gelesis Akili Karuna Tal VedantaBiosciences

Knode Entrega Follica TheSync

Project

Commense Total

Outstandingasof1January 2014

1,114,049 643,000 541,927 290,000 — — 687,500 — — — 3,276,476

Grantedduringtheyear

489,131 — — 1,203,397 550,000 194,063 — — — — 2,436,591

Exercisedduringtheyear

— (5,000) — — — — — — — — (5,000)

Forfeitedduring theyear

— — — (263,597) — (39,583) (25,000) — — — (328,180)

Outstandingasof31December2014

1,603,180 638,000 541,927 1,229,800 550,000 154,480 662,500 — — — 5,379,887

Grantedduringtheyear

122,685 263,746 27,500 396,136 177,500 — 422,500 396,655 850,000 212,500 2,869,222

Exercisedduringtheyear

(15,500) — — — — (1,875) — — — — (17,375)

Forfeitedduringtheyear

— — — — — (3,125) — — — — (3,125)

Outstandingasof31December2015

1,710,365 901,746 569,427 1,625,936 727,500 149,480 1,085,000 396,655 850,000 212,500 8,228,609

Theexercisepricesfortheoptionsgrantedin2014were$0.85,$0.02and$0.05pershareforTal,VedantaBiosciences and Knode, respectively. The exercise prices for the options granted in 2015 were $2.38,$2.69,$2.35,$10.74,$2.28,$0.75,$0and$0forAkili,Karuna,Tal,VedantaBiosciences,Entrega,Follica,TheSyncProjectandCommense,respectively.SignificantsubsidiaryplanGelesis2006StockOptionPlanInMay2006,theDirectorsofGelesis,approvedthe2006StockIncentivePlan(the“GelesisPlan”)whichprovides for the grant of incentive stock options, nonqualified stock options, and restricted stock toemployees, directors, and nonemployees of Gelesis. At 31 December 2015, the number of shares thatremainavailableforissuanceundertheGelesisPlanwas267,580.The options granted under the Gelesis Plan are equity settled and expire 10 years from the grant date. Ingeneral, awards typically vest in three yearsbut vesting conditions can varybasedon thediscretionofGelesis’Directors.

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OptionsgrantedundertheGelesisPlanareexercisableatapricepersharenotlessthanthefairmarketvalueoftheunderlyingordinarysharesonthedateofgrant.Theestimatedfairvalueofoptions,includingtheeffectofestimatedforfeitures,isrecognisedovertheoptions’vestingperiod.Gelesis incurred stock-based compensation expense of $2.2 million and $2.0 million for the years ended31December2015and2014.GelesisfairvaluemeasurementsThefairvalueofthestockoptionsawardedundertheGelesisPlanwasestimatedatthegrantdateusingthe Black Scholes option valuation model, taking into account the terms and conditions upon whichoptionsaregranted,withthefollowingweightedaverageassumptions:

Assumption/Input 2015 2014Expectedawardlife(inyears) 7.8 5.6Expectedawardpricevolatility 72.84% 71.70%Risk-freeinterestrate 2.05% 1.80%Expecteddividendyield — —Grantdatefairvalue $7.34 $6.92Sharepriceatgrantdate $9.13 $10.05Gelesisusedanaveragehistoricalsharepricevolatilitybasedonananalysisofreporteddataforapeergroup of comparable companieswhichwere selected based upon industry similarities. As there is notsufficienthistoricalshareexercisedatatocalculatetheexpectedtermoftheoptions,Gelesiselectedtousethe‘simplified’methodforalloptionsgrantedatthemoneytovalueshareoptiongrants.Underthisapproach,theweightedaverageexpectedlifeispresumedtobetheaverageofthevestingtermandthecontractualtermoftheoption.OtherplansThestockcompensationexpenseunderplansatothersubsidiariesoftheGroupnotincludingGelesiswas$1.7millionand$157,000fortheyearsended31December2015and2014,respectively.Share-basedpaymentexpenseThefollowingtableprovidestheclassificationoftheGroup’sconsolidatedshare-basedpaymentexpenseas reflected in the consolidated statements of comprehensive loss:

Fortheyearsended31December:

2015$000s

2014$000s

Generalandadministrative 9,318 1,440Researchanddevelopment 1,777 1,371Total 11,095 2,811Therewasnoincometaxbenefitrecognisedforshare-basedpaymentarrangementsduringtheperiodspresented.7.Financecost,netThefollowingtableshowsthebreakdownoffinanceincomeandcosts:

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Fortheyearsended31December: 2015$000s

2014$000s

FinanceincomeRealisedgainonavailableforsaleinvestments — 143Interestfromfinancialassetsnotatfairvaluethroughprofitorloss

262 46

Totalfinanceincome 262 189FinancecostsContractualinterestexpenseonconvertiblenotes (598) (41)Interestexpenseonotherborrowings (200) (438)Non-cashinterestexpenseonconvertiblenotes (37) (2,115)Lossonextinguishmentofsubsidiarynotespayable (1,856) —Gainonforeigncurrencyexchange 327 —Totalfinancecosts–contractual (2,364) (2,594)Lossfromchangeinfairvalueofwarrantliability (138) (11,432)Lossonfairvaluemeasurementofderivativeliability (7,371) (44,939)Totalfinancecosts–IAS39fairvalueaccounting (7,509) (56,371)Totalfinancecosts–subsidiarypreferredshares (3,515) —Totalfinancecosts (11,024) (56,371)Financecosts,net (13,126) (58,776)Seenote20forfurtherdisclosurerelatedtolossonfairvaluemeasurementofderivativeliability.8.EarningspershareThe calculationofbasic anddilutedearningsper sharehasbeen calculatedbydividing the loss for theperiod attributable to ordinary shareholders of $39.4 million (2014: $41.6 million), by the weightedaveragenumberofordinarysharesoutstandingof185,281,244(2014:82,453,369)duringtheyearended31December2015:Lossattributabletoordinaryshareholders:

2015 2014Basic

$000sDiluted

$000sBasic$000s

Diluted$000s

Lossfortheyear,attributabletotheownersoftheCompany

(39,393) (39,393) (41,643) (41,643)

Lossattributabletoordinaryshareholders (39,393) (39,393) (41,643) (41,643)Weighted-averagenumberofordinaryshares

2015 2014Basic Diluted Basic Diluted

Issuedordinarysharesat1January 118,100,407 118,100,407 63,658,930 63,658,930Effectofsharesissued 67,180,837 67,180,837 18,794,439 18,794,439Weightedaveragenumberofordinaryshares

185,281,244 185,281,244 82,453,369 82,453,369

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Losspershare 2015 2014

Basic Diluted Basic DilutedLosspershare $(0.21) $(0.21) $(0.51) $(0.51)The potentially dilutive securities excluded from the computation of diluted weighted average sharesoutstanding as theywould be anti-dilutivewas 9,441,126 and 4,416,643 as at 31 December 2015 and2014,respectively.9.PropertyandequipmentPropertyandequipment,net,consistsofthefollowingat:

Cost

LaboratoryandManufacturing

Equipment$000s

Furnitureand

Fixtures$000s

ComputerEquipment

andSoftware

$000s

LeaseholdImprovements

$000s

Constructionin

process$000s

Total$000s

Balanceasof1January2014

808 95 163 172 432 1,670

Additions,netoftransfers

300 3 27 37 — 367

Exchangedifferences

(109) — — (21) (31) (161)

Balanceasof31December2014

999 98 190 188 401 1,876

Additions,netoftransfers

1,723 70 362 1,302 400 3,857

Exchangedifferences

(107) — — (21) (31) (159)

Balanceasof31December2015

2,615 168 552 1,469 770 5,574

AccumulatedDepreciationandImpairmentLoss

LaboratoryandManufacturing

Equipment$000s

Furnitureand

Fixtures$000s

ComputerEquipment

andSoftware

$000s

LeaseholdImprovements

$000s

Constructionin

process$000s

Total$000s

Balanceasof1January2014

(241) (59) (127) (30) — (457)

Depreciation (110) (8) (26) (32) — (176)Exchangedifferences

(16) — — — — (16)

Balanceasof31December2014

(367) (67) (153) (62) — (649)

Depreciation (246) (22) (62) (122) — (452)Exchangedifferences

36 — — 10 — 46

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Balanceasof31December2015

(577) (89) (215) (174) — (1,055)

Property&Equipment,net

LaboratoryandManufacturing

Equipment$000s

Furnitureand

Fixtures$000s

ComputerEquipment

andSoftware

$000s

LeaseholdImprovements

$000s

Constructionin

process$000s

Total$000s

Balanceasof31December2014

632 31 37 126 401 1,227

Balanceasof31December2015

2,038 79 337 1,295 770 4,519

Depreciationofpropertyandequipmentisincludedingeneralandadministrativeexpensesandresearchanddevelopmentexpensesintheconsolidatedstatementofcomprehensiveloss.10.IntangibleassetsIntangible assets consist of licences of intellectual property acquired by the Group through variousagreementswith thirdparties. Licences and intellectual property acquiredare recordedat the valueofcash and non cash consideration transferred. Information regarding the cost and accumulatedamortisationofintangibleassetsisasfollows:

Cost

Licences$000s

Balance at 1 January 2014 3,725Additions 53Balanceat31December2014 3,778Additions 1,160Balanceat31December2015 4,938

Accumulatedamortisation

Licences$000s

Balanceat1January2014 (563)Amortisation (216)Balanceat31December2014 (779)Amortisation (288)Balanceat31December2015 (1,067)

Intangibleassets,net

Licences$000s

Balanceat31December2014 2,999Balanceat31December2015 3,871Amortisationexpenseis includedinresearchanddevelopmentexpensesintheconsolidatedstatementsof comprehensive loss. Amortisation expense, recorded using the straight-line method, wasapproximately$288,000and$216,000fortheyearsended31December2015and2014,respectively.

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11.Cashandcashequivalents

Asof31December: 2015$000s

2014$000s

Bankbalances 135,577 62,432Restrictedcash (826) (472)Totalcashandcashequivalents 134,751 61,960Restrictedcashrepresentscashreservedascollateralagainst lettersofcreditwithabankissuedforthebenefitofalandlordinlieuofasecuritydepositforofficespaceleasedbytheParentanditssubsidiaries.Therestrictedcashisheldincertificateofdepositsandisclassifiedascurrentassetswithinotherfinancialassetsintheconsolidatedbalancesheet.

12.Tradeandotherreceivables

Asof31December: 2015$000s

2014$000s

TradeReceivables 636 1,748OtherReceivables 70 2Totaltradeandotherreceivables

706 1,750

13.EquityOn9January,2015,theCompanycompletedaprivatefinancingroundwith InvescoAssetManagementLimited as the lead investor and issued 24,006,500 ordinary shares resulting in cash proceeds of $52.2million.

On 18 June 2015, the Company acquired the entire issued share capital of PureTech LLC in return for159,648,387OrdinaryShares.Thishasbeenaccountedforasacommoncontroltransactionandhasbeengiveneffectretrospectivelyforallperiodspresentedherein.Ithasthereforebeendeemedthatthesharecapitalwasissuedinlinewithmovementsinsharecapitalasshownpriortothetransactiontakingplace.Inadditionthemergerreserverecordsamountspreviouslyrecordedassharepremium.On24 June2015 theCompany’s entire issuedordinary share capital of 227,248,008ordinary sharesofone pence each were admitted to the premium listing segment of the Official List of the U.K. ListingAuthorityandtotradingontheMainMarketoftheLondonStockExchangeforlistedsecurities.TheInitialPublicOffering(“IPO”)wasfor67,599,621newordinarysharesissuedbytheCompanyat160penceperordinary share.This resulted in$159.3millionofnetproceeds from the IPO (netof issuecostof$11.8million)reflectedinthesharepremiumbalanceasof31December2015.Includedinoperatingexpensesin2015 is$5.5millionofprofessionalservicesassociatedwiththe IPOwhichwerenototherwiseoffsetagainstthenetproceedsoftheoffering.TheCompanyhadtheoption,at itsabsolutediscretion, topayan incentive feetothe IPOunderwriter.PureTechpaid$1.2million,whichwasexpenseduponpayment.The IPO also included an over-allotment option equivalent to 15 percent of the total number of newordinaryshares,or10,139,943.Thestabilisationmanagergavenoticetoexerciseinfullitsover-allotment

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optionon2 July2015.Asa result, theCompany issued10,139,943ordinarysharesat theofferpriceof160pencepershareachievingfurthernetproceedsfortheCompanyof£15.7million,orapproximately$24.2million(netof issuecostofapproximately$772,000).Thetotalnumberof issuedordinaryshares,including unvested equity incentive awards, and voting rights in the Company after issuing the over-allotment shares is 237,387,951.

Equity

Note

31December2015

$000s

31December2014$000s

Sharecapital,£0.01parvalue,issuedandfullypaid226,173,751and118,098,967asof31December2015and31December2014respectively

4,523 2,362

Sharepremium 181,744 —Mergerreserve 138,506 86,755Translationreserve (93) 169Otherreserves 12,863 3,139Accumulateddeficit (111,420) (70,421)EquityattributabletoownersoftheGroup 226,123 22,004Non-controllinginterests

15 (62,070) (45,317)

Total equity 164,053 (23,313)Shareholdersareentitledtovoteonallmatterssubmittedtoshareholdersforavote.Eachordinaryshareisentitledtoonevote.Eachordinaryshare isentitledtoreceivedividendswhenand ifdeclaredbytheCompany’sDirectors.TheCompanyhasnotdeclaredanydividendsinthepast.In2014, theGroup issued37,402,400shares, resulting innetproceedsof$55.8million,netof issuancecosts of $414,000. In conjunction with this financing, PureTech LLC converted 16,065,690 fully vestedProfits Interests and Partnership Shares into common shares and the Directors authorised 13,258,902commonsharesasequityincentivesformanagement,Directorsandadvisers.Alsoin2014,PureTechLLCissued 175,730 shares for consulting services. Upon the conversion of convertible promissory notes,PureTechLLCissued331,560shares.Otherreservescomprisethecumulativecredittoshare-basedpaymentreservescorrespondingtoshare-basedpaymentexpensesrecognisedthroughprofitorloss.14.SubsidiarypreferredsharesCertain of the Group’s subsidiaries have outstanding preferred shares which have been classified as aliabilityinaccordancewithIAS39asthesubsidiarieshaveacontractualobligationtodeliver:1.)cashorotherassetstotheholdersundercertainfutureevents;and/or2.)arequirementtodeliveranuncertainnumber of common shares upon conversion. The preferred shares do not contain mandatory dividendrights. The preferred shares are convertible into common stock of the subsidiary at the option of theholder andmandatorily convertible into common stock of the subsidiary upon a subsidiary listing on apublicmarket at a price above those specified in the agreementsor upon the voteof theholdersof amajorityofthesubsidiarypreferredshares.Theconversionfeaturehasbeenaccountedforasaderivativeliabilityatfairvaluewiththeresidualproceedsallocatedtothesubsidiarypreferredshareatissuance.Thepreferred shares are entitled to a vote with holders of common stock on an as converted basis. The

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holders of the preferred shares are entitled to a liquidation preference amount in the event of aliquidationorasaleoftherespectivesubsidiary.The Group recognises the preferred share balance upon the receipt of cash financing or upon theconversion of notes into preferred shares at the amount received, or carrying balance of any notes andderivatives converted intopreferred shares. Preferred sharesarenot allocated sharesof the subsidiarylosses.Thefollowingsummarisesthesubsidiarypreferredsharebalance:

Asof31December:

2015$000s

2014$000s

Akili 2,625 1,763Follica 94 —Gelesis 52,640 9,731Tal 10,143 —Subsidiarypreferredshares 65,502 11,494In the event of any voluntary or involuntary liquidation, dissolution orwinding up of a subsidiary, theholdersofsubsidiarypreferredshares thenoutstandingshallbeentitledtobepaidoutof theassetsofthe subsidiary available for distribution to shareholders and before any payment shall be made to holdersof common shares. Amerger, acquisition, sale of voting control or other transaction of a subsidiary inwhichtheshareholdersofthesubsidiarydonotownamajorityoftheoutstandingsharesofthesurvivingcompany shall be deemed to be a liquidation event. Additionally, a sale, lease, transfer or otherdisposition of all or substantially all of the assets of the subsidiary shall also be deemed a liquidationevent.Theminimum liquidationpreference thatwouldbepayable to the subsidiarypreferredholdersuponaliquidationeventofthesubsidiaries,isasfollows:

Asof31December:

2015$000s

2014$000s

Akili 4,613 4,613Follica 2,020 2,020Gelesis 60,490 14,451Karuna 413 —Tal 11,430 —Total 78,966 21,084As of 31 December 2014, the Group determined that the balance of the subsidiary preferred sharesclassifiedasacurrentliabilitywasappropriatelystatedattheissuanceamounts,giventhehighdegreeofuncertainty associated with the ultimate conversion of the shares to common stock. However, during2015 the Group determined that the uncertainty related to conversion to common stock had beenreduced as funding was obtained from the IPO and other sources and the businesses had progressedtoward significantmilestone events. As such, theGroup has begun to accrete the subsidiary preferredshares liability up to the minimum liquidation preference amount based on the estimated date ofconversiontocommonstock.For the two-year period ending 31 December 2015, the Group recognised the following changes insubsidiarypreferredshares:

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2014Akili,agrowthstagebusiness,closedonanadditional$8.1millionequityinvestment,ofwhich$3millionwas provided by PureTech. Of the $8.1 million equity investment, $5.1 million was due to the conversionofconvertiblenotes,including$1millionofconvertiblenotesheldbyPureTech.2015InMarch2015,Gelesisclosedan$18.0millionprivateequityfinancingofwhichPureTechinvested$3.0million in the financing. Also, in conjunction with this transaction, preferred shares were issued uponconversionof$4.3millionofoutstandingconvertiblenotes.InMarch2015,Talcloseda$14.5millionprivateequityfinancingofwhichPureTechinvested$5.0millioninthefinancing.Also,inconjunctionwiththistransaction,preferredshareswereissueduponconversionofoutstandingconvertiblenotes.In December 2015, Gelesis closed a $31.5million private equity financing of which PureTech investedapproximately$7million.In 2015, the Company reclassified certain Tal and Karuna balances that were previously classified asequity.15.Non-controllinginterestThe following summarises the changes in the equity classified non-controlling ownership interest insubsidiaries by reportable segment:

Growthstage

businesses$000s

Projectphase

businesses$000s

Total$000s

Non-controllinginterestasof1January2014

(7,148) 5 (7,143)

Newfundsintonon-controllinginterest 1,031 — 1,031Shareofcomprehensiveloss (34,300) — (34,300)EffectofchangeinGroup’sownershipinterest

(4,905) — (4,905)

Non-controllinginterestasof31December2014

(45,322) 5 (45,317)

Newfundsintonon-controllinginterest — — —Shareofcomprehensiveloss (18,854) 3 (18,851)EffectofchangeinGroup’sownershipinterest

2,098 — 2,098

Non-controllinginterestasof31December2015

(62,078) 8 (62,070)

ThefollowingtablesummarisesthefinancialinformationrelatedtotheGroup’ssubsidiarieswithmaterialnoncontrollinginterests,aggregatedforinterestsinsimilarentities,andbeforeintragroupeliminations.

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Fortheyearended31December:

2015 2014Growth

StageBusinesses

$000s

ProjectPhase

Businesses$000s

GrowthStage

Businesses$000s

ProjectPhase

Businesses$000s

StatementofComprehensiveLossRevenue 189 1,175 209 1,750Lossfortheyear (32,695) 986 (68,198) 201Othercomprehensiveloss — — — —Totalcomprehensiveloss (32,695) 986 (68,198) 201Comprehensive loss attributabletoNCI

(18,854) 3 (34,300) —

StatementofFinancialPositionNon-currentassets 4,976 1,518 4,110 4Currentassets 44,594 4,201 6,628 1,339TotalAssets 49,570 5,719 10,738 1,343Non-currentliabilities (12,439) — (526) (142)Currentliabilities (130,712) (1,140) (92,716) (1,400)Total Liabilities (143,151) (1,140) (93,242) (1,542)NetLiabilities (93,581) 4,579 (82,504) (199)CarryingamountofNCI (61,600) (470) (40,778) 5StatementofCashFlowsCashflowsfromoperatingactivities

(20,084) 986 (9,227) 201

Cashflowsfrominvestingactivities

(2,463) — (373) —

Cashflowsfromfinancingactivities

40,041 — 8,348 —

17,494 986 (1,252) 20116.SubsidiarynotespayableThenotespayablebalanceconsistsofthefollowing:

Asof31December:

2015$000s

2014$000s

Loans 2,281 2,459Convertiblenotes 2,674 4,489Totalsubsidiarynotespayable 4,955 6,948LoansInOctober2010,FollicaenteredintoaloanandsecurityagreementwithLighthouseCapitalPartnersVI,L.P. (“LighthouseCapital”).The loansaresecuredbyallofFollica’sassets, includingFollica’s intellectualproperty.Theloanstotalledapproximately$1.2millionat31December2015and2014.InMay 2014, Gelesis entered into a grant and loan agreementwith an Italian economic developmentagency.Borrowingsunderthe loantotalled€980,000(approximately$1.1millionand$1.2millionat31December2015and2014, respectively),andthe loanbears interestat0.33percentperyear.Gelesis is

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required tomake interest paymentsonly in 2014 and2015,withprincipal and interest payments fromJanuary2016throughJanuary2024.Fundsawardedunderthegrantmayberevokedifirregularitiesareidentifiedduringinspectionofcostsbythe Italian economic development agency or for failure to implement or comply with the project plan orto achieve the objectives of the project plan for reasons within Gelesis’ control. In the event of arevocation of the grant, Gelesis would be required to repay the loan immediately, including accruedinterest.ConvertibleNotesCertain of the Group’s subsidiaries have issued convertible promissory notes (“Notes”) to fund theiroperations,withanexpectationofaneventualshare-basedsettlementoftheNotes.SubstantiallyallNotesbecomedueandpayableonoraftereither31Decemberoftheyearofissuanceonthethirtieth(30th)dayfollowingademandbythemajorityofNoteholders,asdefined.SubstantiallyalloftheNotesbearinterestatarateof8percent(or12percentuponaneventofDefault,asdefined)or10percent(or15percentuponaneventofDefault,asdefined).Interestiscalculatedbasedonactualdayselapsed for a 360-day calendar year. Generally, the Notes cannot be prepaidwithout approval from amajorityoftheholdersofasubsidiary’sNotes.The Notes constitute complex hybrid instruments, which contain equity conversion features whereholdersmayconvert,generallyatadiscount,theoutstandingprincipalandaccruedinterestintosharesofthe Borrower before maturity and redemption options upon a change of control of the respectivesubsidiary.Thethreekeyfeaturesaredescribedbelow:• Automatic conversion feature–upon a Qualified Financing, as defined, the unpaid principal and

interest amounts are automatically converted into shares of the subsidiary at the conversion priceequaltothepricesharesaresoldatuponaQualifiedFinancing,lessadiscount.Thediscountsrangefrom5percentto25percent.

• Optional conversion feature–upon a Non Qualified Financing, as defined, holdersmay convert theoutstandingprincipalbalanceandunpaidinteresttosharesattheconversionpriceequaltothepricesharesaresoldatuponaNonQualifiedFinancing,lessadiscount.Thediscountsrangefrom5percentto25percent.

• Change-of-controlfeatures–TheNotesalsogenerallycontainaputoptionsuchthat,intheeventofaChange of Control transaction of the respective subsidiary, as defined, prior to conversion orrepayment of the Notes, the holders will be paid an amount equal to two or three times theoutstanding principal balance plus any accrued and unpaid interest, in cash, on the date of theChange-of-Control.

Theconversionfeaturesandputoptionrepresentembeddedderivativeinstrumentsrequiringbifurcationfrom the debt instruments under IAS 39, Financial Instruments: Recognition and Measurement. Theembeddedderivativesareaccountedforasliabilitycomponents,separatefromthehostdebt.ConvertibleNotesoutstandingwereasfollows:

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VedantaBiosciences

Gelesis Tal Karuna Follica Entrega Knode Endra,Inc

Akili PureTechLLC

Total

1January2014 299,000 — 900,000 505,000 — 125,000 50,000 75,000 1,148,000 — 3,102,000

GrossPrinciple 50,000 3,940,000 500,000 — — — — — 2,625,000 500,000 7,615,000

Discount — (1,576,000) (86,482) — — — — — (991,080) — (2,653,562)Accretion 18,032 568,000 21,620 — — — — — 1,027,930 — 1,635,582Conversion — — (900,000) — — — — — (3,809,850) (500,000) (5,209,850)Repayment — — — — — — — — — — —31December2014 367,032 2,932,000 435,138 505,000 — 125,000 50,000 75,000 — — 4,489,170

GrossPrinciple — — — 1,644,582 200,000 — — — — — 1,844,582

Discount — — — (166,306) (40,000) — — — — — (206,306)Accretion 7,513 227,834 64,862 166,306 40,000 — — — — — 506,515Conversion — (3,159,834) (500,000) — — — — — — — (3,659,834)Repayment (300,000) — — — — — — — — — (300,000)31December2015 74,545 — — 2,149,582 200,000 125,000 50,000 75,000 — — 2,674,127

InAugust2015,Karuna,enteredintoanagreementtoissueupto$3.8millionofconvertiblenotestotheWellcomeTrustsubjecttomeetingcertaindevelopmentmilestones.At31December2015,theCompanyhasdrawndown$1.6millionofthenote.InMay2015,VedantaBiosciencesrepaidconvertiblenotesandrelatedaccruedinterestof$366,000.In conjunction with its March 2015 private financing, Gelesis converted convertible notes and relatedaccrued interestof$3.5million intopreferredshares.Theconversionalso includes$759,000of relatedconvertiblenotederivatives.InMarch2015,Tal,alsoinconjunctionwithitsprivatefinancing,convertedconvertiblenotesandrelatedaccrued interest of $517,000 interest into preferred shares. The conversion also includes $200,000 ofrelatedconvertiblenotederivatives.During2014,alloutstandingConvertibleNotesandrelatedaccruedinterestofAkili,totalling$4.1million,were converted into 2,312,603 shares of Akili preferred stock. In conjunctionwith this conversion, theoutstanding derivative related to the converted notes was converted into subsidiary preferred shares intheamountof$1.3million.InFebruary2014,alloutstandingconvertiblenotesandaccruedinterestofTal,totalling$1.1million,wereconvertedinto820,932sharesofTalpreferredstock.Inconjunctionwiththistransaction,theoutstandingderivative related to the converted notes was converted into accumulated deficit in the amount of$321,000.During2014,outstandingconvertiblenotesandrelatedaccruedinterestofPureTech,totalling$507,000,were converted into 331,560 shares. In conjunction with this transaction, the outstanding derivativerelatedtotheconvertednoteswasconvertedintoaccumulateddeficitintheamountof$70,000.17.SubsidiarywarrantsThe following is a summary of the warrants on subsidiary shares outstanding related to variousborrowings,stockissuancesandbusinesstransactions:

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Issued

Classification

Exercisablefor

NumberofShares

Recordedvalueasat31December:

2015$000s

2014$000s

GelesisandGelesisLLCAug-08 Equity Commonstock 1,314 6 6May-09 Equity Commonstock 1,314 6 6May-09 Equity Commonstock 1,501 1 1Nov-09 Equity Commonstock 28,361 18 18Apr-11 Liability SeriesA-1

preferredstock— 664 801

Jun-12 Liability Series A-3preferredstock

238,190 2,830 2,447

Aug-13 Liability SeriesA-4preferredstock

719,677 7,561 8,134

Aug-13 Equity Commonstock 719,677 52 52FollicaJul-13 Liability Preferredstock 2,263,508 2,593 2,219Aug-13 Liability Preferredstock 193,023 222 189Jan-14 Liability Preferredstock 193,023 223 190Oct-14 Liability Preferredstock 146,697 170 145Dec-15 Equity Commonstock 19,688 20 —TotalLiabilities 14,263 14,125TotalEquity 103 83Inconnectionwithobtainingvariousamendmentstoits2008Loan,Gelesisissuedthefollowingwarrants:• In2008and2009,Gelesis issuedwarrantstopurchase1,314and1,314sharesof itscommonstock,

respectively,atanexercisepriceof$59.94pershare.Thewarrantsexpireupontheearlierof (i)10years from the issuance date (ii) five years after the effective date of an initial public offering ofGelesis,or(iii)asaleofGelesis.

• Awarrantwasissuedin2009,amendedin2009andin2011,ultimatelyfor1,501sharesofcommonstockatanexercisepriceof$0.56per.Thewarrantsterminateupontheearlierof(i)7May2019,(ii)fiveyearsaftertheeffectivedateofaninitialpublicofferingofGelesis,or(iii)thesaleofGelesis.

• In2009,Gelesis issuedawarrant topurchase,28,361sharesofGelesis’ commonstockand in2011thewarrantexercisepricewasamendedto$0.56pershare.Thewarrantterminatesupontheearlierof (i)30November2019 (ii) threeyearsafter theeffectivedateofan initialpublicofferingor (iii)asaleofGelesis.

• In2011,Gelesis issuedawarrant topurchasesharesofSeriesA-1atanexercisepriceequal to thelowerof$4.44per shareor thepriceper share received in the first saleof sharesofGelesis’ stockresultinginatleast$5milliongrossproceedstoGelesis.ThewarrantisexercisableforthenumberofsharesofSeriesA-1equal tothequotientof$332,000dividedbytheexercisepriceof thewarrant.Thewarrantterminatesupontheearlierof(i)27April2021(ii)threeyearsaftertheeffectivedateofan initial public offering or (iii) a sale of Gelesis. The fair value of thewarrants was $664,000 and$801,000at31December2015and2014,respectively.

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InJune2012,inconnectionwithanamendmenttoamasterpurchaseandlicensingagreementwithoneofitscustomers,inexchangefortherighttoexpandthefielduseoftheintellectualpropertypurchased,Gelesisissuedfullyvestedwarrantstopurchase238,190sharesofSeriesA3atanexercisepriceof$0.04per share. The warrant is subject to automatic exercise upon a deemed liquidation event. The warrantsexpire in June 2022. The warrants were amended in December 2014, and became exercisable uponcompletionofGelesis’acquisitionofaparticularcompanyinFebruary2015.The fair valueof thewarrantswas$708,000at thedateof issuanceandwas recordedasan intangiblelicenceasset,andacorrespondingwarrant liability.The fair valueof thewarrantswas$2.8millionand$2.5millionat31December2015and2014,respectively.InAugust2013, inconnectionwiththe issuanceofSeriesA4convertiblepreferredstock,orSeriesA4,Gelesisissuedcontingentwarrantstopurchase719,677sharesofSeriesA4atanexercisepriceof$0.04pershare.ThewarrantswererequiredtobeissuedifGelesisdidnotcompleteanIPO,orwasliquidated,dissolved,woundupor soldprior to February2015. Suchan IPOorother eventdidnotoccurprior toFebruary2015andthewarrantswereissuedatthattime.Thewarrantswillexpire10yearsfromthedateofissuance.Thewarrantswereclassifiedasaliabilityandrecordedatfairvalue,whichwasestimatedat$1.5millionatthedateofissuance.Thefairvalueofthewarrantswas$7.5millionand$8.1millionat31December2015and2014,respectively.Thefollowingweightedaverageassumptionswereusedtodeterminethefairvalueofthewarrantsat31December2015:

SeriesA-1Warrants

SeriesA-3Warrants

SeriesA-4Warrants

Expectedterm 5.3years 6.5years 7.6yearsExpectedvolatility 59.00% 68.00% 72.00%Expecteddividendyield — — —Risk-freeinterestrate 1.76% 2.01% 2.09%Estimatedfairvalueofthe convertiblepreferredstock

$4.44 $3.00 $3.77

Exercisepriceofwarrants

$4.44 $0.04 $0.04

Thefollowingweightedaverageassumptionswereusedtodeterminethefairvalueofthewarrantsat31December2014:

SeriesA-1Warrants

SeriesA-3Warrants

SeriesA-4Warrants

Expectedterm 6.3years 7.5years 8.6yearsExpectedvolatility 74.00% 59.00% 57.00%Expecteddividendyield — — —Risk-freeinterestrate 1.76% 1.97% 2.07%Estimatedfairvalueoftheconvertible

$3.68 $3.65 $3.63

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preferredstockExercisepriceofwarrants

$4.44 $0.04 $0.04

Inconnectionwithvariousamendmentstoits2010LoanandSecurityAgreement,Follicaissuedpreferredstockwarrantsatvariousdatesin2013and2014.Eachofthewarrantshasanexercisepriceof$0.1425andacontractualtermoftenyearsfromthedateof issuance.Thewarrants issuedin2013andJanuary2014weredeemedtohavenovalueatthetimeoftheirissuance.Thewarrantliabilityhasbeenmarkedtomarket at each subsequent reporting date and at 31 December 2015 and 2014 the warrants weredeemedtohaveavalueof$3.2millionand$2.7million,respectively.Awarrantwas issued in2015for19,688sharesofcommonstockatanexercisepriceof$0.75per.Thewarrant is classified within equity and expires on 14 December 2020.Thefollowingweightedaverageassumptionswereusedtodeterminethefairvalueofthewarrantsat31December:

2015 2014Expectedterm 7.56-8.80years 8.56-9.80yearsExpectedvolatility 59.93%-63.96% 59.34%-60.43%Expecteddividendyield — —Risk-free interest rate 2.02%-2.15% 2.02%-2.15%Estimatedfairvalueoftheconvertiblepreferredstock

$1.25 $1.08

Exercisepriceofwarrants $0.14 $0.14

18.Tradeandotherpayables

Asof31December:

2015$000s

2014$000s

Tradepayables 2,393 1,614Accruedexpenses 4,830 3,117Totaltradeandotherpayables 7,223 4,73119.LeasesOffice and laboratory space is rented under non cancellable operating leases. These lease agreementscontainvariousclausesforrenewalattheGroup’soptionand,incertaincases,escalationclausestypicallylinkedtoratesofinflation.In December 2014, the Company entered into a 10-year lease for 9,446 square feet of office spacebeginning in April 2015 and ending on 31 August 2025. The lease requires a letter of credit of $350,000,which is held in a certificate of deposit, as further discussed in note 11. The lease has a base rent ofapproximately$444,000,whichincreasesbyapproximatelytwopercentperyearovertheleaseterm.InAugust 2015, Vedanta entered into a lease for 9,027 square feet of office space beginning February2016 and ending December 2022. The lease requires a letter of credit of $350,000,which is held in acertificateofdeposit,asfurtherdiscussedinnote11.Theleasehasaninitialbaserentofapproximately$330,000,whichincreasestoapproximately$576,000overtheleaseterm.

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InNovember2015,Akilientered intoa lease for3,603square feetofoffice spacebeginningDecember2015andendingJanuary2019.Theleaserequiresasecuritydepositofapproximately$21,000recordedas other non-current assets. The lease has a base rent of approximately $128,000, which increaseapproximately3percentperyearovertheleaseterm.

Minimumrentalcommitmentsundernoncancellableleaseswerepayableasfollows:Asof31December:

2015$000s

2014$000s

Withinoneyear 867 331Betweenoneandfiveyears 4,255 2,330Morethanfiveyears 3,570 2,387Total minimum lease payments 8,692 5,048Totalrentexpenseundertheseleaseswasapproximately$432,000and$296,000duringtheyearsended31 December 2015 and 2014, respectively. Rent expense is included in general and administrativeexpensesintheconsolidatedstatementsofcomprehensiveloss.20.FinancialinstrumentandrelateddisclosuresAll of the Group’s financial assets and liabilities, with the exception of the derivative and warrantliabilities,aremeasuredatamortisedcost.Thederivativeandwarrant liabilitiesarecarriedat fairvaluewithchangesrecognisedinthroughFinancecosts,netintheconsolidatedstatementsofcomprehensiveloss.AssumptionsoftheGroupintheestimationoffairvalueofthederivativeliabilityarebelowandrefertonote17forassumptionsusedintheestimationofthewarrantfairvalue.

Financialinstrumentsbycategoryat31December:

2015Carrying amount Fair Value

Financialassets$000s

Financialliabilities

$000s

Level1$000s

Level2$000s

Level3$000s

Total$000s

FinancialassetsCashandcashequivalents 134,751 — 134,751 — — 134,751U.S.Treasuries 178,955 — 178,955 — — 178,955Certificates of deposit 826 — — 826 — 826Otherdeposits 57 — — 57 — 57Loansandreceivables:Tradeandotherreceivables 706 — — 706 — 706Totalfinancialassets 315,295 — 313,706 1,589 — 315,295FinancialliabilitiesTradeandotherpayables — 7,223 — 7,223 — 7,223Subsidiarywarrantliability — 14,263 — — 14,263 14,263Subsidiaryderivativeliability — 65,501 — — 65,501 65,501Subsidiarypreferredshares — 65,502 — 65,502 — 65,502Financialliabilitiesmeasuredatamortisedcost:Subsidiarynotespayable — 4,955 — 4,955 — 4,955Totalfinancialliabilities — 157,444 — 72,725 79,764 157,444

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2014 Carryingamount FairValue

Financialassets$000s

Financialliabilities

$000s

Level1$000s

Level2$000s

Level3$000s

Total$000s

FinancialassetsCashandcashequivalents 61,960 - 61,960 - - 61,960U.S.Treasuries 701 - 701 - - 701Certificatesofdeposit 472 - - 472 - 472Otherdeposits 5 - - 5 - 5Loansandreceivables:Tradeandotherreceivables 1,750 - - 1,750 - 1,750Totalfinancialassets 64,888 - 62,661 2,227 - 64,888FinancialliabilitiesTradeandotherpayables - 4,731 - 4,731 - 4,731Subsidiarywarrantliability - 14,125 - - 14,125 14,125Subsidiaryderivativeliability - 52,794 - - 52,794 52,794Subsidiarypreferredshares - 11,494 - 11,494 - 11,494Financialliabilitiesmeasuredatamortisedcost:Subsidiarynotespayable - 6,948 - 6,948 - 6,948Totalfinancialliabilities - 90,092 - 16,225 66,919 90,0952The embedded derivatives associated with the subsidiary convertible promissory notes and theconversionoptionwithinthesubsidiarypreferredsharesareaccountedforasliabilitiesandaremarkedtofair value at each reporting period. The fair value of the embedded derivative liability at inception, 31December 2015 and 2014 was determined using a probability weighted present value technique, whichincludes unobservable (Level 3) inputs supported by little or no market activity, such as time to nextqualified equity financing, implied discount rate, and probability of a qualified financing or an optionpricingallocationmethod.Basedonexistingbusinessplans, theGroupalsocontemplated futureequityraisesandtheimpactonthevaluationoftheembeddedderivativeliabilityifthestockvalueisbelowtheexercisepriceattheestimateddateoftheprojectedfuturecapitalraise.AsummaryofthechangesintheGroup’sembeddedderivativeliabilitiesandwarrantliabilitiesmeasuredatfairvalueusingsignificantunobservableinputs(“Level3”)asofandfortheyearsended31December2015and2014isasfollows:

DerivativeLiability-PreferredStockConversion

$000s

DerivativeLiability-

ConvertibleNotes$000s

WarrantLiability$000s

Balanceasof1January2014 2,075 504 2,548Valueofderivativesatissuance 4,159 2,675 145Changeinfairvalue 45,487 (414) 11,432Settlementofderivatives — (1,692) —Balanceasof31December2014 51,721 1,073 14,125Valueofderivativesatissuance 6,041 206 —

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Changeinfairvalue 7,402 26 138Settlementofderivatives — (968) —Balanceasof31December2015 65,164 337 14,263The change in the fair value of derivatives and warrants is recorded in Finance costs, net in theconsolidatedstatementsofcomprehensiveloss.Ateachmeasurementdate,thefairvalueoftheconversionrightsembeddedinthepreferredshareswasdeterminedusingwithandwithoutframeworkwhichconsistedofathree-stepprocess.First,thevalueofeach business within the Group was determined using a discounted cash flow model, guidelinetransactionmethod,or througha recentarm’s length financinground.Second, thevalueof thesubjectpreferredshareswasdeterminedusingeitheranoptionpricingallocationmodeloraprobabilityweightedexpected returnmodel, where the conversion rights of the preferred shareholders were included andthenexcluded.Third,thefairvalueofconversionrightswascalculatedasthedifferenceofvaluebetweentheconcludedvaluesofpreferredshareswithandwithouttheconversionrights.QuantitativeinformationaboutthesignificantunobservableinputsusedinthefairvaluemeasurementoftheGroup’sembeddedderivativeliabilityrelatedtothesubsidiarypreferredsharesdesignatedasLevel3asfollows:

Option Pricing Model Inputs

MeasurementDate

RangeofValuesExpirationDate Volatility Risk-FreeRate

28/2/2014 3.5years 60.00% 0.94%31/3/2014 5years 75.00% 1.73%31/12/2014 2.0-5.0years 60.00% 0.67%-1.65%30/6/2015 1.5-4.5years 35.0%-65.0% 0.48%-1.53%31/12/2015 1.5-4.0years 35.0%-60.0% 0.86%-1.54%

ProbabilityWeightedExpectedReturnMethodInputs

MeasurementDate

RangeofValuesTimetoAnticipated

ExitEventProbabilityof

IPO/M&A/DissolutionSale31/3/2014 1.0year 40.0%/45.0%/15.0%31/12/2014 0.33years 70.0%/25.0%/5.0%30/6/2015 0.38-0.50years 70.0%/30.0%/0.0%31/12/2015 1.33years 70.0%/30.0%/0.0%

Quantitativeinformationaboutthesignificantunobservableinputsusedinthefairvaluemeasurementofthe Group’s embedded derivative liability related to the convertible notes designated as Level 3 is asfollows:

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SignificantUnobservableInputs

Asat31December:AtIssuance 2015 2014

Timetonextqualifiedequityfinancing

1-2.03years 0.5-1years 0.16-0.25years

Implieddiscountrate 11.3%-2,459.0% 11.0%-31.7% 18.3%-34.8%Probabilitiesofaqualifiedfinancing 0%-100% 45.0%-75.0% 10%-90%Valuation policies and procedures are regularlymonitored by the Company’s finance group. Fair valuemeasurements, includingthosecategorisedwithinLevel3,arepreparedandreviewedontheir issuancedate and then on an annual basis and any third-party valuations are reviewed for reasonableness andcompliancewiththefairvaluemeasurementsguidanceunderIFRS.The fair value of these embedded derivative liabilities may differ significantly in the future from thecarrying value as of 31 December 2015, and, accordingly, adjustments may be recorded in theconsolidatedstatementsofcomprehensivelossatthattime.21.CapitalandfinancialriskmanagementTheCompany’sfinancialstrategypolicyistosupportitsstrategicpriorities,maintaininvestorandcreditorconfidence,and tosustain futuredevelopmentof thebusiness throughanappropriatemixofdebtandequity.Managementmonitors the level of capital deployed and available for deployment in subsidiaryprojects.TheDirectorsseektomaintainabalancebetweenthehigherreturnsthatmightbepossiblewithhigherlevelsofdeployedcapitalandtheadvantagesandsecurityaffordedbyasoundcapitalposition.The Group’s Directors have overall responsibility for establishment and oversight of the Group’s riskmanagementframework.TheGroupisexposedtocertainrisksthroughitsnormalcourseofoperations.The Group’s main objective in using financial instruments is to promote the commercialisation ofintellectualproperty throughtheraisingand investingof funds for thispurpose.TheGroup’spolicies incalculatingthenature,amountandtimingof investmentsaredeterminedbyplannedfutureinvestmentactivity. Due to the nature of activities and with the aim to maintain the investors’ funds secure andprotected, Group’s policy is to hold any excess funds in highly liquid and readily available financialinstrumentsandmaintainexposuretootherfinancialriskstoinsignificant.TheGrouphasexposuretothefollowingrisksarisingfromfinancialinstruments:CreditriskCreditriskistheriskoffinanciallosstotheGroupifacustomerorcounterpartytoafinancialinstrumentfails to meet its contractual obligations. Financial instruments that potentially subject the Group toconcentrations of credit risk consist principally of cash and cash equivalents and trade and otherreceivables.TheGroupheldfollowingbalances:

2015$000s

2014$000s

Cashandcashequivalents 134,751 61,960Shortterminvestments 178,955 701Tradeandotherreceivables 706 1,750Total 314,412 64,411

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TheGroup investsexcess cash inU.S. TreasuryBills,U.S.debtobligationsandmoneymarketaccounts,whichtheGroupbelievesareofhighcreditquality.The Group assesses the credit quality of customer, taking into account its financial position, pastexperience and other factors. The credit quality of financial assets that are neither past due nor impairedcanbeassessedbyreferencetocreditratings(ifavailable)ortohistoricalinformationaboutcounterpartydefaultrates.Theageingoftradeandotherreceivablesthatwerenotimpairedat31December:

2015$000s

2014$000s

Neitherpastduenorimpaired 496 1,250Pastdue30-90days — —Pastdue90-365days 210 500Total 706 1,750LiquidityriskLiquidityriskistheriskthattheGroupwillencounterdifficultyinmeetingtheobligationsassociatedwithits financial liabilities that are settled by delivering cash or another financial asset. The Group activelymanages its risk of a shortage of funds by closely monitoring the maturity of its financial assets andliabilitiesandprojectedcashflowsfromoperations,underbothnormalandstressedconditions,withoutincurringunacceptable lossesorriskingdamagetotheGroup’sreputation.Thetablebelowsummarisesthe maturity profile of the Group’s financial liabilities as at 31 December 2015 based on contractualundiscountedpayments:

2015Carryingamount

$000s

Within3 months

$000s

3to12months

$000s

1to5years$000s

Total$000s

Subsidiarynotespayable 4,955 4,310 — 1,072 5,382Tradeandotherpayables 7,223 5,341 1,882 — 7,223Subsidiarypreferredshares 65,502 65,502 — — 65,502Otherliabilities 622 554 68 — 622Total 78,302 75,707 1,950 1,072 78,729

2014

Carryingamount$000s

Within3months

$000s

3to12months$000s

1to5years$000s

Total$000s

Subsidiarynotespayable 6,948 785 3,570 2,954 7,309Tradeandotherpayables 4,731 4,731 — — 4,731Subsidiarypreferredshares 11,494 11,494 — — 11,494Otherliabilities 288 211 60 17 288Total 23,461 17,221 3,630 2,971 23,822Inadditiontotheabovefinancialliabilities,theGroupisrequiredtospendthefollowingminimumamountsunderintellectualpropertylicenceagreements:

80

2016$000s

2017$000s

2018$000s

2019$000s

2020$000s

Licencefees 30 40 50 75 100Total 30 40 50 75 100MarketriskMarket risk is the risk that changes inmarketprices, suchas foreignexchange rates, interest ratesandequity prices, will affect the Group’s income or the value of its holdings of financial instruments. TheobjectiveoftheGroup’smarketriskmanagementistomanageandcontrolmarketriskexposureswithinacceptable parameters, while optimising the return. The Groupmaintains the exposure tomarket riskfromsuchfinancialinstrumentstoinsignificantlevels.TheGroup’sexposuretochangesininterestratesisdeterminedtobeinsignificant.ForeignexchangeriskTheGroup’s grant revenues and the research and development costs associatedwith those grants aregenerated and incurred in Euros. The Group’s results of operations and cash flows will be subject tofluctuations due to change in foreign currency exchange rates. Foreign currency transaction exposurearisingfromexternaltradeflowsisgenerallynothedged.Capital risk managementTheGroupisfundedbyequityanddebtfinancing.Totalcapitaliscalculatedas‘totalequity’asshownintheconsolidatedstatementsoffinancialposition.TheGroup’sobjectiveswhenmanagingcapitalaretosafeguardtheGroup’sabilitytocontinueasagoingconcerninordertoprovidereturnsforshareholdersandbenefitsforotherstakeholdersandtomaintainan optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capitalstructure,theGroupmayissuenewsharesorborrownewdebt.TheGrouphassomeexternaldebtandnomaterialexternally imposedcapitalrequirements.TheGroup’ssharecapital isclearlysetout innote13.Asdiscussedinnote14,certainoftheGroup’ssubsidiarieshaveissuedpreferredsharesthatincludetherighttoreceiveapaymentintheeventofanyvoluntaryorinvoluntaryliquidation,dissolutionorwindingup of a subsidiary, which shall be paid out of the assets of the subsidiary available for distribution tostockholdersandbeforeanypaymentshallbemadetoholdersofcommonstock.22.CommitmentsandcontingenciesGelesishasentered intoapatent licenceandassignmentagreementwhereby itwillbe required topayapproximately$8millionupontheachievementofcertainmilestones,payroyaltiesonfuturesalesand/orapercentageofsublicenseincome.Noneofthemilestoneshavebeenmet.

Gelesishasalsobeenawardedgrantsfromtwogovernmentagencies,whicharerecognisedasrevenueasthe qualifying expenses are incurred. The grant agreement contains certain provisions, including, interalia, maintaining a physical presence in the region for defined periods. Failure to comply with thesecovenantswouldrequireeitherafullorpartialrefundofthegranttothegrantingauthority.On 12 January, 2015, Vedanta entered into an agreementwhich grants Janssen Biotech, Inc. (“JBI”), asubsidiaryofJohnson&Johnson,theexclusiverightandlicencetomake,use,sell,importandotherwisedeveloporcommercialiseany licensedproductduringthetermoftheagreement.Vedantahasentered

81

intoalicenceagreementwherebyitagreedtopay10percentofthelicencefeeincomegeneratedbytheJBI Agreement to theUniversity of Tokyo. As of 31December 2015, the Company received an upfrontpaymentof$10millionfromJBI,resultingin$1millioninpaymentstoUniversityofTokyo.Other members of the Group are also parties to certain licensing agreements that require milestonepaymentsand/orroyaltiesonfuturesales.Noneof themilestoneshavebeenmetandtheamountsofany potential futuremilestone or royalty payments cannot be reliablymeasured as of the date of thefinancialinformation.23.RelatedpartiesTransactionswithkeymanagementpersonnelcompensation.KeymanagementpersonnelcompensationKeymanagement includesexecutivedirectorsandmembersof theexecutivemanagement teamof theGroup.ThecompensationofkeymanagementpersonneloftheGroupwasasfollowsfortheyearsended31December:

2015$000s

2014$000s

Short-termemployeebenefits 2,150 1,612Share-basedpayments 2,235 282Total 4,385 1,894Wages and employee benefits include salaries, health care and other non cash benefits. Share-basedpaymentsaregenerallysubjecttovestingtermsoverfutureperiods.Convertibledebtissuedtodirectors,keymanagementpersonnelandkeypersonnelofthebusinessesCertain members of the Group have invested in convertible notes issued by the Group’s subsidiaries.Activityofrelatedpartiesbysubsidiaryarepresentedbelow.

VedantaBiosciences

Akili Tal Karuna PeerIn Total

Balanceasof1January2014 — 51 317 39 54 461Loansadvanced 50 50 — — — 100Loanrepaymentsmade — — — — — —Interestcharged 3 8 4 4 5 24Interestpaid — — — — — —Conversions — (109) (321) — — (430)Balanceasof31December2014

53 — — 43 59 155

Loansadvanced — — — — — —Loanrepaymentsmade — — — — — —Interestcharged 5 — — 3 5 13Interestpaid — — — — — —Conversions — — — — — —Balanceasof31December2015

58 — — 46 64 168

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ThenotesissuedbyVedantaBiosciences,havenostatedmaturitydatebutarepayableupondemandofamajority of noteholders. The notes issued by Akili are also payable upon demand of a majority ofshareholdersnoearlierthan31December2015.Thenotes issuedtorelatedpartiesbear interestrates,maturity dates, discounts and other contractual terms that are the same as those issued to outsideinvestorsduringthesameissuances,asdescribedinnote16.AlloftheoutstandingprincipalandinterestonthenotesissuedbyAkilitorelatedpartiesduring2013and2014totalling$109,000wasconvertedto70,460SeriesA2preferredsharesinDecember2014.All of the outstanding principal and interest on the notes issued by Tal to related parties during 2011totalling$321,000wasconvertedto247,747SeriesA2preferredsharesinFebruary2014.Directors’andseniormanagers’shareholdingsandshareincentiveawardsThe Directors and senior managers hold beneficial interests in shares in the following businesses andsourcingcompaniesasat31December2015:

DirectorsBusinessname(shareclass)

Numberofshares

heldasat31

December2015

Numberofoptions

heldasat31

December2015

Ownershipinterest(1)

Mr.JoichiIto Akili(SeriesA-2preferred)

26,627 — 0.30%

Ms.DaphneZohar(2) Gelesis(common) 34,444 618,734 5.20%DameMarjorieScardino — — — —Dr.BennettShapiro(4) Akili(SeriesA-2

preferred)(3)33,088 — 0.30%

Gelesis(common) 24,010 10,841 0.50%Gelesis(SeriesA-1preferred)

23,419 — 0.50%

Tal(SeriesA-2preferred)(3)

14,451 — 0.10%

VedantaBiosciences(common)

— 25,000 0.50%

Dr.RobertLanger Entrega(common) — 250,000 5.00%Dr.RajuKucherlapati Enlight(ClassB

common)30,000 — 3.00%

Dr.JohnLaMattina(4) Akili(SeriesA-2preferred)

37,372 — 0.40%

Gelesis(common)(4) 54,120 63,050 1.30%Gelesis(SeriesA-1preferred)(4)

49,524 — 1.30%

Tal(SeriesA-2preferred)

114,411 — 1.20%

VedantaBiosciences(common)

— 25,000 0.50%

Mr.ChristopherViehbacher — — — —

83

Mr.StephenMuniz — — — —SeniorManagersDr.EricElenko — — — —Mr.DavidSteinberg — — — —

Notes:(1)Ownership interestsareasat31December2015calculatedonadilutedbasis, including issuedandoutstandingshares,warrantsandoptions(andwrittencommitmentstoissueoptions)topurchaseshares,but excluding unallocated shares authorised to be issued pursuant to equity incentive plans, and anysharesofcommonstockissuableuponconversionofoutstandingconvertiblepromissorynotes. (2)CommonstockandoptionsheldbyYishaiZohar,thehusbandofMs.Zohar.Ms.Zohardoesnothaveany direct interest in the share capital of Gelesis.Ms. Zohar recuses herself from any and allmaterialdecisionswithregardtoGelesis.(3) Shares held through Dr. Bennett M. Shapiro and Ms. Fredericka F. Shapiro, JTWROS. 49,523 shares ofcommonstockand49,523sharesofSeriesA1preferredstockinGelesisheldbyDr.JohnandMs.MaryLaMattina.12,642sharesinGelesisheldindividuallybyDr.LaMattina.(4)Inaddition,thefollowingDirectorsholdconvertiblenotesissuedbybusinesses:(i)Dr.BennettShapiroholdsconvertiblenotesissuedbyVedantaBiosciencesintheaggregateprincipalamountof$50,000and(ii) Dr. John LaMattina holds convertible notes issued by PeerIn in the aggregate principal amount of$50,000.Directorsandseniormanagershold32,974,173sharesand13.9%votingrightsoftheCompanyasof31December2015.TransactionswithotherrelatedpartiesManagementservicesandoverheadagreementwithastockholderPureTech has entered into an agreement with AZTherapies, Inc. to provide management services,includingoperating, legalandadministrativeservices,aswellasofficespaceandinfrastructureservices.As compensation for these services,AZTherapies, Inc. issued50,000and150,000 sharesof its commonstocktoPureTechduringeachoftheyearsended31December2015and2014.Thevalueoftheseshareswasdeterminedbasedonthefairvalueoftheservicesreceived.ThescientificfounderandchairmanofAZTherapies,Inc.isDr.DavidElmaleh,Ms.Zohar’sfather,andisalsoashareholderofPureTech.24. TaxationAmountsrecognisedinprofitorloss:

2015$000s

2014$000s

Netloss (58,244) (75,943)Incometaxesexpense/(benefit) 1,924 (278)Net loss before taxes (56,320) (76,221)

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Recognisedincometaxexpense/(benefit)

2015$000s

2014$000s

Federal 1,895 36Foreign 95 73State (16) 10Totalcurrentincometaxexpense 1,974 119Federal — —Foreign (50) (397)State — —Totaldeferredincometax(benefit) (50) (397)Totalincometaxexpense/(benefit),recognised

1,924 (278)

ReconciliationofeffectivetaxrateTheGroupisprimarilysubjecttotaxationintheU.S.,thereforethereconciliationoftheeffectivetaxratehas been prepared using the U.S. statutory tax rate. A reconciliation of the U.S. statutory rate to theeffectivetaxrateisasfollows:

2015%

2014%

Weightedaveragestatutoryrate 34.00% 34.00%EffectofstatetaxrateinU.S. 3.24% 0.90%Credits 0.27% 0.19%Share-basedpaymentmeasurement -0.54% 3.84%Marktomarketadjustments -4.53% -24.39%Incomeofpartnershipsnotsubjecttotax -3.97% -1.45%Accretiononpreferredshares -2.12% 0.00%Other -3.92% -1.95%Currentyearlossesforwhichnodeferredtaxassetisrecognised

-25.85% -10.78%

-3.42% 0.36%

TheGroupissubjecttotaxationintheU.S.andU.K.Additionally,theGroupisexposedtostatetaxationincertain jurisdictions within the U.S. Changes in corporate tax rates can change both the current taxexpense(benefit)aswellas thedeferredtaxexpense(benefit).Themaximumcorporatetaxrate intheU.S. for the corresponding periods is 35 percent. The Group is generally subject to a 34 percent rateapplicabletosmallertaxpayers.U.S.corporationsareroutinelysubjecttoauditbyfederalandstatetaxauthoritiesinthenormalcourseofbusiness. Gelesis is currently under examination by the IRS for the financial year ended 31 December2012. TheGroupdoesnot expect anunfavourableoutcome from this tax auditwhichwould adverselyimpacttheGroup’sfinancialcondition,resultsofoperationsorcashflows.DeferredtaxassetsDeferred tax assets have not been recognised for the U.S. amounts in respect of the following items,becauseitisnotprobablethatfuturetaxableprofitwillbeavailableagainstwhichtheGroupcanusethe

85

benefits therefrom.Deferredtaxassetshavebeenrecognisedfortheforeignamounts inrespectof thefollowingitems:

2015$000s

2014$000s

Operatingtaxlosses 22,057 11,239Capitallosscarryovers 758 758Researchcredits 850 925Investmentinsubsidiaries 1,061 791Other 2,568 550Share-basedpayments 7,256 4,253

Deferred tax assets 34,550 18,516Other (1,590) (171)Deferredtaxliabilities 32,960 18,345Deferredtaxassets/(liabilities),net,recognised — (55)Deferredtaxassets/(liabilities),net,notrecognised 32,960 18,400Deferred tax is measured at the rates that are expected to apply in the period when the temporarydifferencesareexpectedtoreverse,basedontaxratesandlawsthathavebeenenactedorsubstantiallyenactedbythestatementoffinancialpositiondate.TherewerenomovementsindeferredtaxrecognisedinincomeorequityfortheUnitedStatesin2015or2014asthedeferredtaxassetwasnotrecognisedinanyofthoseyears.Therewasmovementindeferredtaxrecognisedinincomeorequityin2015and2014fortheforeignjurisdictioninthefollowingamounts,respectively($55,000)and($412,000).TheGroupconsidersearningsgeneratedfromitsforeignsubsidiaryinItalytobepermanentlyre-invested,thereforeU.S.taxeshavenotbeenprovidedonundistributedearnings.

UncertaintaxpositionsThechangestouncertaintaxpositionsfrom1January2014through31December2015,wereasfollows:

U.S.$000s

Foreign$000s

Total$000s

Grosstaxliabilitiesat1January2014 — 53 53Additions based on tax provisions related to the currentyear

— 3 3

Additionstotaxpositionsofprioryears — 34 34Reductionsduetosettlementswithtaxauthorities — — —Reductionsforpositionsofprioryears — — —Grosstaxliabilitiesat31December2014 — 90 90Additionsbasedontaxprovisionsrelatedtothecurrentyear

— — —

Additionstotaxpositionsofprioryears 78 — 78Reductionsduetosettlementswithtaxauthorities — — —Reductionsforpositionsofprioryears — (57) (57)Grosstaxliabilitiesat31December2015 78 33 111

86

Included in thebalanceof uncertain tax positions at 31December 2015was approximately $33,000ofunrecognisedtaxbenefitsthat,ifrecognised,wouldaffecttheannualeffectiveincometaxrate.The liability for uncertain tax benefits as of 31 December 2015 and 2014 included accrued interest of$2,000and$4,000,respectively.25.SubsequenteventsInJanuary2016,Akilicloseda$30.5millionprivateequityfinancingofwhich$16millionwasreceivedintheinitialclosinginJanuary2016and$14.5millionistobereceiveduponthefinalclosinginSeptember2016.PureTechinvestedapproximately$11.5millionoftheinitialclosing.PureTech’sownershipinterestinAkiliremainssubstantiallythesameasitwaspriortothefinancing.